eTrade 2005 Annual Report Download - page 173

Table of Contents
8.00% Senior Notes Due June 2011
In 2005 and 2004, the Company issued an aggregate principal amount of $100 million and $400 million in senior notes due June 2011
(the “8.00% Notes”), respectively. Interest is payable semi-annually and notes are non-callable for four years and may then be called
by the Company at a premium, which declines over time. Original debt issuance costs of $1.5 million are included in other assets and
are being amortized over the term of the senior notes.
7
3
/
8
% Senior Notes due September 2013
In 2005, the Company issued an aggregate principal amount of $600 million in senior notes due September 2013 (the “7
3
/
8
% Notes”.)
Interest is payable semi-annually and the notes are non-callable for four years and may then be called by the Company at a premium,
which declines over time. Original debt issuance costs of $8.5 million are included in other assets and are being amortized over the term
of the notes.
7
7
/
8
% Senior Notes Due December 2015
In 2005, the Company issued an aggregate principal amount of $300 million in senior notes due December 2015 (the “7
7
/
8
% Notes”.)
Interest is payable semi-annually and the notes are non-callable for four years and may then be called by the Company at a premium,
which declines over time. Original debt issuance costs of $3.7 million are included in other assets and are being amortized over the term
of the notes.
All senior notes are unsecured and will rank equal in right of payment with all of the Company’s existing and future unsubordinated
indebtedness and will rank senior in right of payment to all our existing and future subordinated indebtedness.
6
1
/
4
% Mandatory Convertible Notes Due November 2018
In November 2005, the Company issued 18.0million of mandatory convertible notes (“Units”) with a face value of $450 million. Each
Unit consists of a purchase contract and a 6
1
/
8
% senior note. The Company recorded the purchase contracts and senior notes at fair
value, with $15 million recorded in equity and $435 million in debt, respectively.
Each purchase contract obligates the holder to purchase, and the Company to sell, at a purchase price of $25.00 in cash, a variable
number of shares of the Company’s common stock. The stock conversion ratio varies depending on the average closing price of the
Company’s common stock over a 20-day trading period ending on the third trading day immediately preceding November 18, 2008
(“Reference Price”). If the Reference Price is equal to or greater than $21.816 per share, the settlement rate will be 1.1459 shares of
common stock. If the Reference Price is less than $21.816 per share but greater than $18.00 per share, the settlement rate is equal to
$25.00 divided by the Reference Price. If the Reference Price is less than or equal to $18.00 per share, the settlement rate will be 1.3889
shares of common stock. The Company is obligated under the purchase contract to sell shares of its common stock under the
agreement in November 2008. In November 2008, the aggregate principal amount of the senior notes will be remarketed, which may
result in a change in the interest rate and maturity date of the senior notes.
Before the Purchase Date, the Units will be reflected in diluted earnings per share calculations using the treasury stock method as
defined by SFAS No.128,
Earning per Share
. Under this method, the number of shares of common stock used in calculating diluted
earnings per share (based on the settlement formula applied at the end of the reporting period) is deemed to be increased by the
excess, if any, of the number of shares that would be issued upon settlement of the purchase contracts less the number of shares that
could be purchased by the Company in the market at the average market price during the period using the proceeds to be received
upon settlement. Therefore, dilution will occur for periods when the average market price of the Company’s common stock for the
reporting period is above $21.816.
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2006. EDGAR Online, Inc.