eTrade 2002 Annual Report Download - page 60

Table of Contents
Index to Financial Statements
Dempsey and certain deposit accounts from Advanta National Bank, a subsidiary of Advanta Corporation, in fiscal 2001, the acquisition of
certain customer deposit accounts from Chase Manhattan Bank USA, National Association in February 2002, the acquisition of E*TRADE
Professional Trading in June 2002 and our December 2002 acquisitions of Engelman and Ganis. The significant increase in the amortization of
goodwill and other intangibles in fiscal 2001 is primarily related to the acquisitions of E*TRADE Access in May 2000, E*TRADE Germany in
October 2000, E*TRADE Mortgage in February 2001, Web Street in June 2001 and several of our international affiliates. Because of the
increase in recorded intangibles which occurred during 2002, we expect amortization expense to increase to reflect a full year of amortization in
fiscal 2003.
Acquisition-related expenses were $11.5 million in fiscal 2002, $11.2 million in fiscal 2001 and $36.4million in fiscal 2000. In fiscal 2002,
acquisition-related expenses included approximately $5.5 million related to non-capitalizable costs incurred in connection with our acquisition
of E*TRADE Professional Trading and $4.4 million related to payments under a management continuity agreement (“Dempsey MCA”) in
connection with the acquisition of Dempsey in October 2001. In fiscal 2001, acquisition-related expenses include approximately $5.8 million
related to losses incurred by Web Street during the transition of Web Street’ s accounts to our systems. The transition of Web Street’ s accounts
was completed in the fourth quarter of fiscal 2001, at which time all of Web Street’ s domestic stand-alone operations ceased. Also included in
acquisition-related expenses during fiscal 2001 was approximately $4.9 million paid under the Dempsey MCA. Acquisition-related expenses in
fiscal 2000 primarily related to transaction costs associated with the acquisition of ETFC and E*TRADE Technologies.
Facility restructuring and other exit charges were $16.5 million in fiscal 2002 compared to $202.8 million in fiscal 2001. The fiscal 2002
expense includes $12.2 million related to our strategic decision to sell our German operations and provide brokerage services to our German
customers through the operations of our other European subsidiaries. As discussed below, we also increased our 2001 facility restructuring
charges by $7.3million and recognized $3.6 million in related severance expensed during fiscal 2002 and $0.5 million in additional asset
write-offs. Offsetting these charges in fiscal 2002 were gains associated with the sale and liquidation of two of our international subsidiaries in
prior years and the final resolution in fiscal 2002 of related accrued obligations.
In fiscal 2001, we announced a restructuring plan aimed at streamlining operations primarily by consolidating facilities in the United States and
Europe. This restructuring resulted in a pre-tax charge of $202.8million ($148.0 million after tax) in fiscal 2001.
The restructuring was designed to consolidate facilities to bring together key decision-makers and streamline operations. We recorded a pre-tax
restructuring charge of $131.8 million related to our facilities consolidation at September 30, 2001 (adjusted by $3.3 million in the fourth
quarter of fiscal 2001 and further adjusted by $7.3 million in fiscal 2002), representing the undiscounted value of ongoing lease commitments
offset by anticipated third party subleases. The charge also includes a pre-tax write-off of leasehold improvements and furniture and fixtures
totaling $38.6 million for fiscal 2001.
As a result of our fiscal 2001 worldwide consolidation activities, certain software developed for specific locations and certain other fixed assets
are no longer used. In total, we recorded a pre-tax non-cash charge of $52.5million related to the write-off of capitalized software and hardware
related to certain technology projects and other fixed assets in fiscal 2001. In calculating the charge related to our asset write-off, we calculated
the amount of write-offs as the net book value of assets less the amount of estimated proceeds upon disposition for certain saleable assets.
The restructuring accrual also included other pre-tax charges of $15.8 million for fiscal 2001 for committed expenses, termination of consulting
agreements and cancellation penalties on various services for facilities we have vacated or expect to vacate. We recorded an increase to our
initial restructuring charge of $5.9 million for severance payments made to employees identified in the fourth quarter of fiscal 2001 and an
additional amount
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2003. EDGAR Online, Inc.