eTrade 2002 Annual Report Download - page 62

Table of Contents
Index to Financial Statements
Non-Operating Income (Expense)
The following table sets forth the components of non-operating income (expense) and percentage change information for fiscal 2002, fiscal
2001 and fiscal 2000 (dollars in thousands):
Year Ended
December 31,
YearEnded
September30,
2000
Percentage Change
2002
Versus
2001
2001
Versus
2000
2002 2001
Corporate interest income $ 12,655 $ 22,179 $ 17,220 (43)% 29%
Corporate interest expense (47,740 ) (52,862 ) (29,535 ) (10)% 79%
Gain (loss) on investments (18,507 ) (49,812 ) 211,149 (63)% (124)%
Equity in income (loss) of investments 9,071 (6,174 ) (11,513 ) 247% (46)%
Unrealized losses on venture funds (9,683 ) (34,716 ) (736 ) (72)% 4,617%
Fair value adjustments of financial derivatives (11,662 ) (3,112 ) — (275)% —
Gain on early extinguishment of debt 5,346 49,318 — (89)% —
Other (1,444 ) 200 (1,810 ) (822)% 111%
Total non-operating income (expense) $ (61,964 ) $ (74,979 ) $ 184,775 (17)% (141)%
Corporate interest income primarily relates to interest income earned on corporate investment balances and related party notes. Corporate
interest income was $12.7 million in fiscal 2002, $22.2 million in fiscal 2001 and $17.2 million in fiscal 2000. The decrease in corporate
interest income from fiscal 2001 to fiscal 2002 was primarily due to lower interest yields earned on these corporate investments. Further,
decreased corporate interest income reflects a decrease in corporate cash balances and related party note balances. The increase in corporate
interest income from fiscal 2000 to fiscal 2001 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 of 6.75% convertible subordinated notes in May 2001 and interest
income earned on related party notes.
Corporate interest expense primarily reflects the interest expense resulting from the issuance of $325million 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. Corporate interest expense was $47.7 million in fiscal 2002, $52.9 million in fiscal 2001 and $29.5 million in fiscal 2000.
Beginning in the second quarter of fiscal 2001, we retired 6% subordinated notes totaling $280 million through share and cash exchanges. The
increase in corporate interest expense from fiscal 2000 to fiscal 2001 primarily reflects the interest expense resulting from the issuance of $650
million in convertible subordinated notes during the second quarter of fiscal 2000.
Gain (loss) on investments was a loss of $18.5 million for fiscal 2002, a loss of $49.8 million for fiscal 2001 and a gain of $211.1 million in
fiscal 2000. In fiscal 2002, loss on investments included impairment writedowns of privately-held equity investments of $12.5 million for losses
determined to be other-than-temporary. In fiscal 2001, loss on investments was primarily comprised of a $40.6 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 investments in fiscal 2000 is
$77.5 million from 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 under the equity method.
Equity income (loss) on investments was income of $9.1 million in fiscal 2002, loss of $6.2 million in fiscal 2001 and $11.5 million in fiscal
2000. Income in fiscal 2002 primarily reflected our investment in the KAP Group, LLC (“KAP”) offset by losses in our investment in
E*TRADE Japan K.K., both accounted for under the equity method. In March 2003, SOFTBANK announced the proposed merger of
2003. EDGAR Online, Inc.