eTrade 2002 Annual Report Download - page 150

Table of Contents
Index to Financial Statements
Gain on Early Extinguishment of Debt
The Company recorded a gain on early extinguishment of debt of $5.3 million in fiscal 2002, $49.3 million in fiscal 2001, none in the three
months ended December 31, 2000 and none in fiscal 2000. In fiscal 2002, gain on early extinguishment of debt included an $8.6 million gain
from the retirement of $64.9 million of the Company’ s 6.0% convertible subordinated notes in exchange for approximately 6.5 million shares of
the Company’ s common stock, offset by a $3.3 million loss recorded as a result of the early redemption of $100million adjustable rate advances
from the FHLB. In fiscal 2001, gain on early extinguishment of debt included a $59.9 million gain from the retirement of $214.8 million of the
Company’ s 6.0% convertible subordinated notes in exchange for approximately 19.2 million shares of the Company’ s common stock and $15.3
million in cash, offset by a $10.6 million loss recorded as a result of the early redemption of $827 million of adjustable and fixed rate advances
from the FHLB. The FHLB advances were entered into as a result of normal funding requirements of the Company’ s banking operations. The
loss consisted primarily of prepayment penalties and costs associated with these early redemptions.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. SFAS No. 145 requires that any gains or losses on extinguishment of debt that were classified as an extraordinary item
in prior periods that are not unusual in nature and infrequent in occurrence be reclassified. In the fourth quarter of fiscal 2002, the Company
adopted the requirements of SFAS No. 145 in its consolidated financial statements, resulting in a reclassification of its previous reported
extraordinary gains (losses) on early extinguishment of debt to non-operating income (expense).
In September 2002, the EITF reached a consensus on Issue 02-15, Determining Whether Certain Conversions of Convertible Debt to Equity
Securities Are within the Scope of FASB Statement No. 84, Induced Conversions of Convertible Debt. The EITF reached a consensus that
SFAS No. 84 applies to all conversions that occur pursuant to revised conversion privileges that are exercisable only for a limited period of
time and result in the issuance of all of the equity securities issuable pursuant to the original conversion terms of the debt offering, regardless of
the party that initiates the offer or whether the offer relates to all debt holders. The consensus should be applied prospectively to all applicable
inducements that close after September 12, 2002. The Company has adopted EITF 02-15 effective September 12, 2002. Since September 12,
2002, no convertible debt was retired through a conversion to equity.
15.ACCOUNTS PAYABLE, ACCRUED, OTHER LIABILITIES AND SHORT-TERM BORROWINGS
Accounts payable, accrued and other liabilities consist of the following (in thousands):
December31,
2000 2001
Payable for Bank securities purchased, collateral not received (see below) $ 130,460 $ —
Accrued expenses 105,020 186,758
Other short-term borrowing arrangements (see below) 29,139 33,050
Restructuring accrual (see Note 21) 70,156 89,543
Accounts payable 13,662 33,683
Capital lease obligations (see Note 26) 4,397 18,209
Other 272,181 203,879
Total accounts payable, accrued, other liabilities and short-term funding $ 625,015 $ 565,122
Payable for Bank Securities Purchased, Collateral Not Received
As part of its normal operations, the Bank enters into commitments to buy and sell mortgage-backed securities in order to manage certain
interest rate risk.
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