eTrade 2002 Annual Report Download - page 116

Table of Contents
Index to Financial Statements
(1) Under the terms of the Dempsey acquisition, certain key executives will receive payments totaling $12.0 million if they continue to be employed by the Company through October 2003.
Acquisition-related expenses included $4.4 million for fiscal 2002 and $4.9 million for fiscal 2001 related to these arrangements. At December 31, 2002, future maximum payments under the Dempsey
management continuity arrangements are $1.9 million.
(2) The Company obtained a controlling interest in Web Street on June 30, 2001, and completed the acquisition of all its outstanding shares by August 6, 2001. Following the acquisition, the domestic
customer accounts of Web Street were transferred to E*TRADE Securities and the domestic operations of Web Street ceased on September 30, 2001. The net losses incurred by Web Street during this
account transition period of $5.8 million are included in acquisition-related expenses for fiscal 2001.
(3) In December 2002, the Company began negotiations to sell its German subsidiary to an unrelated party. As a result, the Company recorded a $12.2 million expense in fiscal 2002, related to exiting
certain activities in Germany. The Company entered into an agreement to sell its German subsidiary in March 2003 subject to Board and regulatory approval. See Note 21.
(4) In March 2002, the Company issued 0.1 million shares of common stock in exchange for certain exercised Nordic warrants. The shares were issued pursuant to a forward agreement entered into by the
Company and Nordic warrant holders at the time of the acquisition of Nordic.
(5) In November 2000, the Company sold its ownership interest in E*TRADE @ Net Bourse S.A. for approximately 80.5 million Euros (approximately $68.0 million as of November 2000, the date of the
transaction). Of this amount, approximately 8.2 million Euros (approximately $7.0 million as of November 2000, the date of the transaction) was held in escrow for two years, of which 50% would be
released after one year. In November 2001, $3.5 million was returned to the Company with the remaining 50% released in December 2002. In conjunction with this transaction, the Company reacquired
its licensing rights to market its brand in France, as well as the ownership interests in E*TRADE SARL, E*TRADE Italia S.r l. and E*TRADE Benelux, previously held by E*TRADE @ Net Bourse
S.A. The Company recognized a gain of $3.5 million in fiscal 2002 related to the settlement of this sale and receipt of the final escrow payment. See Note 21.
The pro forma information below assumes that the acquisitions which took place in fiscal 2002 and fiscal 2001, all occurred at the beginning of
fiscal 2001 and includes the effect of amortization of goodwill in fiscal 2001 and intangibles acquired from January 1, 2001 (in thousands,
except per share amounts):
Year Ended December 31,
2002 2001
Net revenues $ 1,406,026 $ 1,548,771
Income (loss) before cumulative effect of accounting change $ 100,003 $ (221,468 )
Net loss $ (193,666 ) $ (221,468 )
Basic income (loss) per share before cumulative effect of accounting change $ 0.28 $ (0.58 )
Diluted income (loss) per share before cumulative effect of accounting change $ 0.27 $ (0.58 )
Basic and diluted loss per share $ (0.53 ) $ (0.58 )
The pro forma information is for informational purposes only and is not necessarily indicative of the results of future operations nor results that
would have been achieved had the acquisitions taken place at the beginning of fiscal 2001.
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