eTrade 2002 Annual Report Download - page 66

Table of Contents
Index to Financial Statements
authorizing us to repurchase up to 50.0 million shares of common stock. Pursuant to the stock buyback program approved by the Board, the
Company remains authorized to repurchase up to 4.3 million additional shares of common stock.
Of the 52.7 million shares of our common stock repurchased and retired, approximately 30.4 million shares were purchased in three private
transactions with SOFTBANK Corporation (“SOFTBANK”), a significant shareholder of E*TRADE, for approximately $195.9 million. Of this
total, 20.0 million shares were purchased at a price of $7.28 per share, which represented a discount from the market price on the day of sale.
Debt Offerings and Retirements
In fiscal 2000, we completed a private offering of an aggregate principal amount of $650 million of convertible subordinated notes due
February 2007. The notes are convertible, at the option of the holder, into common stock at a conversion price of $23.60 (15.7 million shares
based on the $370.3 million principal amount of notes outstanding at December 31, 2002). The notes bear interest at 6%, payable
semi-annually, and are non-callable for three years and may then be called by us at a premium, which declines over time. The holders have the
right to require redemption at a premium in the event of a change in control or other defined redemption event. We used $145.0 million of the
$631.3 million in net proceeds to pay the outstanding balance on a $150million line of credit, which was subsequently terminated in February
2000. In fiscal 2002, we retired $64.9million of these notes in exchange for 6.5 million shares of our common stock. In fiscal 2001, we retired
$214.8 million of these notes in exchange for 19.2 million shares of our common stock and $15.3 million in cash. Debt issuance costs of $19.1
million were incurred in connection with the issuance of this debt and included in other assets. Through December 31, 2002, approximately
$4.8million had been amortized and reflected in corporate interest expense and $7.8 million removed in connection with the extinguishment of
the $279.7 million of debt. See Note 14 to the Consolidated Financial Statements.
On May 29, 2001, We completed a private offering of $325 million aggregate principal amount of convertible subordinated notes due May
2008. The notes are convertible, at the option of the holder, into a total of approximately 29.7 million shares of our common stock at a
conversion price of $10.925 per share. The notes bear interest at 6.75%, payable semiannually, and are non-callable for three years and may
then be called by us at a premium, which declines over time. The holders have the right to require redemption at a premium in the event of a
change in control or other defined redemption event. The net proceeds from this debt offering were used to repurchase $238.9 million of
common shares, to fund merger and acquisition activity during fiscal 2001, and for general corporate purposes, including capital expenditures
and to meet working capital needs. Debt issuance costs of $10.5 million are included in other assets and are being amortized to interest expense
over the term of the notes.
Technology Center Financing
On March 27, 2002, we exercised our purchase option to purchase our 164,500 square foot technology operation center located near Atlanta,
Georgia. We used the cash collateral of $71.9 million posted in accordance with the terms of the original lease agreement entered into on July
30, 1999 to acquire the related property. The funds used to purchase our technology facility were included in other assets through the date of
purchase.
Other Sources of Liquidity
At December 31, 2002, we have financing facilities totaling $275 million to meet the needs of E*TRADE Clearing. These facilities, if used,
would be collateralized by customer securities. There was $5.5 million outstanding as of December 31, 2002 and no borrowings outstanding as
of December 31, 2001, under these lines. We also have multiple loans collateralized by equipment owned by us, for which $23.7 million was
outstanding as of December 31, 2002. We have also financed the purchase of fixed assets under capital leases, with an outstanding balance of
$4.4 million at December 31, 2002. In addition, we have entered into numerous agreements with other broker-dealers to provide financing
under our stock loan program.
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2003. EDGAR Online, Inc.