eTrade 2003 Annual Report Download - page 97

Table of Contents
Index to Financial Statements
The Company has not provided deferred income taxes on approximately $31.6 million of undistributed earnings in its foreign subsidiaries
at December 31, 2003, as it is the Company’s intention to permanently reinvest such earnings.
At December 31, 2003, the Company had net operating loss carry-forwards of approximately $67.4 million for Federal income tax
purposes. These carry-forwards expire through 2022. The extent to which the loss carry-forwards can be used to offset future taxable income
may be limited.
NOTE 18—SHAREHOLDERS’ EQUITY
Shares Exchangeable into Common Stock
In August 2000, EGI Canada Corporation issued approximately 9.4 million Exchangeable Shares in connection with the Company’s
acquisition of E*TRADE Technologies. Holders of Exchangeable Shares have dividend, voting and other rights equivalent to those of
E*TRADE’s common shareholders. Exchangeable Shares may be exchanged at any time, at the option of the holder, on a one-for-one basis for
E*TRADE common stock. The Company may redeem all outstanding Exchangeable Shares for E*TRADE common stock after August 23,
2005 or earlier under certain circumstances. In the past three years, Exchangeable Shares were converted as follows: 0.2 million in 2003, 0.2
million in 2002 and 2.3 million in 2001. At December 31, 2003, approximately 1.4 million Exchangeable Shares were outstanding.
Stock Repurchases
In 2003, the Company’s Board of Directors approved a new $100.0 million repurchase program. The open-ended plan provides the
flexibility to buy back common stock and retire debt or a combination of both. At December 31, 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 program.
In 2002, the Company repurchased and retired 10.2 million shares of common stock for an aggregate purchase price of $43.5 million. In
addition, the Company retired an additional 5.0 million shares of common stock, valued at $28.8 million, in connection with the satisfaction of
shareholders’ notes receivable. In 2001, the Company repurchased and retired approximately 37.5 million shares of common stock for an
aggregate purchase price of approximately $239.1 million. Except for 7.0 million shares repurchased in 2001, these shares were repurchased
under a multi-year stock buyback program approved by the Company’s Board of Directors in September 2001. Of the 52.7 million shares of
common stock repurchased and retired, approximately 30.4 million shares were purchased in three private transactions with SOFTBANK
Holdings, Inc., who was a significant shareholder of the Company, for approximately $195.9 million. Of this total, 20.0 million shares were
purchased at a price of $7.28 per share, which represented a discount from the market price on the day of sale.
Deferred Stock Compensation
During 2003, the Company issued 1.7 million shares of restricted stock to executive officers, thereby increasing the amount of deferred
stock compensation in the consolidated balance sheets by $13.4 million, the fair market value of the shares on the date of grant. The officers’
right to retain these shares does not vest in any part until the five-year anniversary of the date of grant, at which time the rights to retain the
shares vest in full. The Company will recognize compensation expense related to these shares ratably over the five-year vesting period.
In 2001, in connection with the issuance of 4.7 million shares of restricted common stock to the Company’s former CEO, the Company
recorded deferred stock compensation of $29.3 million, the fair market value of the shares on the date of grant. This amount was being
amortized to expense ratably over an 18 month to five-year period.
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