eTrade 2002 Annual Report Download - page 65

Table of Contents
Index to Financial Statements
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 September12, 2002, no convertible debt was retired through a conversion to equity.
Other expense was $1.4 million in fiscal 2002, other income of $0.2 million in fiscal 2001 and other expense of $1.8 million in fiscal 2000,
which is primarily comprised of foreign exchange gains (losses), recorded as a result of fluctuations in foreign exchange rates for assets and
liabilities held on our balance sheet that are denominated in non-functional currencies and also includes losses on fixed asset disposals.
Income tax expense (benefit) represents the expense for federal and state income taxes at an effective tax rate of 43.9% for fiscal 2002, (7.6)%
for fiscal 2001 and 81.8% for fiscal 2000. The rate for fiscal 2002 reflects a decrease in taxes from goodwill, losses in certain foreign
jurisdictions and capital losses for which no benefit was recognized. The rate for fiscal 2001 reflects a decrease in the tax benefit for
non-deductible expenses such as certain compensation and the amortization of goodwill, differences between our statutory and foreign effective
tax rates and losses in certain foreign jurisdictions for which no benefit was recognized. The rate for fiscal 2000 reflects an increase in tax
expense from non-deductible acquisition-related expenses combined with the amortization of goodwill and differences between our statutory
and foreign effective tax rate.
Minority interest in subsidiaries was $1.6 million for fiscal 2002, $0.5 million for fiscal 2001 and $(0.2)million for fiscal 2000. Minority
interest in subsidiaries results primarily from minority equity interest in various membership interests of E*TRADE Professional Trading LLC
and ETFC’ s interest payments to subsidiary trusts which have issued Company-obligated mandatorily redeemable capital securities and which
hold junior subordinated debentures of ETFC. Also included in minority interest in subsidiaries is the net income or loss attributed to a minority
interest in one of our international affiliates in fiscal 2002 and fiscal 2001 and two of our international affiliates in fiscal 2000.
Cumulative effect of accounting change was $293.7 million in fiscal 2002, which was due to our adoption of SFAS No. 142, effective January
1, 2002, whereby we reviewed our goodwill for impairment using fair market value tests and as a result wrote-down goodwill associated with
certain of our international subsidiaries acquired in the previous years. As required under SFAS No. 142, we will continue to review, at least
annually, the impairment (if any) of all of our goodwill positions and record future impairment charges to operating expenses. See Note 23 to
Consolidated Financial Statements. The cumulative effect of accounting change of $83,000 in the three months ended December 31, 2000
resulted from our adoption of SFAS No. 133.
LIQUIDITY AND CAPITAL RESOURCES
We have historically met our liquidity needs primarily through investing and financing activities, consisting principally of equity and debt
offerings, increases in core deposit accounts, other borrowings and sales of loans or securities. We believe that we will be able to renew or
replace our funding sources at prevailing market rates, which may be higher or lower than current rates, as well as to supplement these funding
sources with cash flow from operations.
Equity Offerings and Retirements
In fiscal 2002, we repurchased and retired 10.2 million shares of common stock for an aggregate purchase price of $43.5 million. In addition,
we retired an additional 5.0 million shares of common stock, valued at $28.8million, in connection with the satisfaction of shareholders’ notes
receivable. In fiscal 2001, we repurchased and retired approximately 37.5 million shares of common stock for an aggregate purchase price of
approximately $239.1 million. Except for 7.0 million shares repurchased in fiscal 2001, these shares were repurchased under a multi-year stock
buyback program approved by our Board of Directors in September 2001
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2003. EDGAR Online, Inc.