eTrade 2003 Annual Report Download - page 40

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Table of Contents
Index to Financial Statements
2003, no common stock had been repurchased, and no debt had been retired under the plan. As of February 27, 2004, the Company had not
retired any debt, but had repurchased 1.8 million shares for an aggregate amount of $25.1 million under this plan.
In 2001 and 2002, we repurchased and retired 47.7 million shares of common stock for an aggregate purchase price of $282.6 million. In
addition, we retired an additional 5.0 million shares of common stock, valued at $28.8 million, in connection with the satisfaction of
shareholders’ notes receivable. Except for 7.0 million shares repurchased in 2001, these shares were repurchased under a multi-year stock
buyback program approved by our Board of Directors in September 2001.
In 2000 and 2001, we completed private offerings of $975.0 million aggregate principal amount of convertible subordinated notes due in
February 2007 and May 2008. The notes are convertible, at the option of the holder, into approximately 45.4 million shares of our common
stock at conversion prices ranging from $10.925 to $23.60 per share. The notes bear interest at 6.00% and 6.75%, payable semiannually, and
are non-callable for three years and may then be called by us at a premium, which declines over time. The holders have the right to require
redemption at a premium in the event of a change in control or other defined redemption event. The net proceeds from these debt offerings
were used to repurchase common shares, to pay the outstanding balance on a $150.0 million line of credit and to fund merger and acquisition
activity during 2001, and for general corporate purposes, including capital expenditures and to meet working capital needs.
In 2002, we retired $64.9 million of the 6.00% notes in exchange for 6.5 million shares of our common stock. In 2001, we retired $214.8
million of these notes in exchange for 19.2 million shares of our common stock and $15.3 million in cash. See Note 15 to Consolidated
Financial Statements.
Other Sources of Liquidity
At December 31, 2003, we had financing facilities totaling $325.0 million to meet the needs of E*TRADE Clearing. These facilities, if
used, would be collateralized by customer securities. There were no amounts outstanding at December 31, 2003 and $5.5 million was
outstanding at December 31, 2002, under these lines. At December 31, 2003, we also had a total of $17.2 million of loans outstanding,
collateralized by equipment owned by us, as well as $0.9 million of capital leases outstanding, which we used to finance fixed-
assets purchases.
In addition, we have numerous agreements with other broker-dealers to provide financing under our stock loan program.
In our banking operations, we seek to maintain a stable funding source for future periods in part by attracting core deposit accounts,
which are accounts that tend to be relatively stable even in a changing interest rate environment. Typically, time deposit accounts, transactional
accounts and accounts that maintain a relatively high balance provide a relatively stable source of funding. In 2003, we began sweeping
Brokerage customer money market fund balances to the Bank, which were previously held in money market funds not on our balance sheets.
At December 31, 2003, our average retail banking deposit account balance was approximately $21,877 and our banking customers maintained
an average of 1.56 accounts. Savings and transactional deposits increased from $4.3 billion at December 31, 2002 to $9.0 billion at December
31, 2003, an increase of 110%. Retail certificates of deposit decreased from $3.7 billion at December 31, 2002 to $3.2 billion at December 31,
We also rely on borrowed funds, such as FHLB advances and securities sold under agreements to repurchase to provide liquidity for the
Bank. Total banking-related borrowings decreased 10% from $7.2 billion at December 31, 2002 to $6.5 billion at December 31, 2003. At
December 31, 2003, the Bank had approximately $5.2 billion in additional borrowing capacity.
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