eTrade 2004 Annual Report Download - page 112

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Table of Contents
Index to Financial Statements
Share Repurchases
From time to time the Company’s Board of Directors authorizes share repurchase and debt retirement plans, as they determine that they
are likely to create long-term value for its shareholders. These plans are open-ended and provide the flexibility to buy back common stock,
redeem for cash its outstanding convertible subordinated notes, retire debt in the open market or a combination of all three. Under these
authorized plans, the Company has repurchased some of its common stock and retired some of its convertible subordinated notes.
In 2004, the Company repurchased 13.7 million shares of its common stock for an aggregate $175.8 million. Also under the repurchase
plans, the Company used $86.2 million in cash for a partial redemption of its 6.75% Notes. In 2003, the Company did not repurchase any
shares of its common stock. In 2002, the Company repurchased 10.2 million shares of its common stock for an aggregate $43.5 million. Also in
2002, the Company retired 5.0 million shares of its common stock, valued at $28.8 million, in connection with the satisfaction of shareholders’
notes receivable.
As of December 31, 2004, the Company had approximately $238.0 million available under its authorized share repurchase and debt
retirement plans to purchase additional shares of its common stock or retire additional debt.
Deferred Stock Compensation
In 2004, the Company issued 0.9 million shares, with fair market value of $11.1 million, of restricted common stock to its executive
officers and other employees. Of these grants, 0.7 million shares vest annually over a four-year period, with the remaining to vest 100% on the
five-year anniversary of the date of grant. The Company will recognize compensation expense related to these shares ratably over the
applicable vesting periods.
In 2003, the Company issued 1.7 million shares, with fair market value of $13.4 million, of restricted stock to its executive officers. 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
periods.
In 2003 and 2004, the Company cancelled 3.6 million shares of unvested restricted stock as executive officers and employees resigned
from the Company. Of these cancellations, 3.2 million shares, or unvested deferred stock compensation of $19.5 million, related to the
resignation of the Company’s former CEO in January 2003.
Amortization of deferred stock compensation was $4.7 million for 2004, $2.3 million for 2003 and $8.7 million for 2002.
NOTE 21—EMPLOYEE BENEFIT PLANS
Stock Option Plans
The Company’s 1996 Stock Incentive Plan (the “1996 Plan”) provides for the grant of nonqualified or incentive stock options to officers,
directors, key employees and consultants for the purchase of shares of the Company’s common stock at a price determined by the Board of
Directors at the date the option is granted.
Options are generally exercisable ratably over a four-year period from the date the option is granted and expire within ten years from the
date of grant. However, approximately 6.1 million options were granted to non-executive employees in 2003 that vested over one year, which
did not result in any recognized expense. Also, concurrent with the Company’s former CEO’s resignation, the Company extended the
expiration date of his previously vested
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