eTrade 2003 Annual Report Download - page 46

Table of Contents
Index to Financial Statements
We believe all of our existing activities and investments are permissible under the Gramm-Leach-Bliley Act, but the OTS has not yet
fully interpreted these provisions. Even if our existing activities and investments are permissible, we are unable to pursue future activities that
are not financial in nature. We are also limited in our ability to invest in other savings and loan holding companies.
In addition, the Bank is subject to extensive regulation of its activities and investments, capitalization, community reinvestment, risk
management policies and procedures and relationship with affiliated companies. Acquisitions of and mergers with other financial institutions,
purchases of deposits and loan portfolios, the establishment of new Bank subsidiaries and the commencement of new activities by Bank
subsidiaries require the prior approval of the OTS, and in some cases the FDIC, which may deny approval or limit the scope of our planned
activity. These regulations and conditions could place us at a competitive disadvantage in an environment in which consolidation within the
financial services industry is prevalent. Also, these regulations and conditions could affect our ability to realize synergies from future
acquisitions, could negatively affect us following the acquisition and could also delay or prevent the development, introduction and marketing
of new products and services.
Risks Relating to Owning Our Stock
We have incurred losses in the past and we cannot assure you that we will be profitable
We have incurred operating losses in prior periods and we may do so in the future. We reported net income of $203.0 million in 2003,
which includes $134.6 million of pre-
tax restructuring and other exit charges; net losses of $186.4 million in 2002, which includes a cumulative
effect of accounting change of $293.7 million; and net losses of $241.5 million in 2001, which includes pre-tax facility restructuring and other
exit charges of $202.8 million.
Our ratio of debt to equity may make it more difficult to make payments on our debts or to obtain financing
At December 31, 2003, we had an outstanding balance of $695.3 million in convertible subordinated notes. Our ratio of debt (our
convertible debt, capital lease obligations and term loans) to equity (expressed as a percentage) was 47.7% at December 31, 2003. We may
incur additional indebtedness in the future. The level of our indebtedness, among other things, could:
The market price of our common stock may continue to be volatile
•
make it more difficult to make payments on our debt;
•
make it more difficult or costly for us to obtain any necessary financing in the future for working capital, capital expenditures, debt
service requirements or other purposes;
•
limit our flexibility in planning for, or reacting to, changes in our business; and
•
make us more vulnerable in the event of a downturn in our business.
From January 1, 2002 through December 31, 2003, the price per share of our common stock has ranged from a high of $12.91 to a low of
$2.81. The market price of our common stock has been, and is likely to continue to be, highly volatile and subject to wide fluctuations. In the
past, volatility in the market price of a company’s securities has often led to securities class action litigation. Such litigation could result in
substantial costs to us and divert our attention and resources, which could harm our business. Declines in the market price of our common stock
or failure of the market price to increase could also harm our ability to retain key employees, reduce our access to capital and otherwise harm
our business.
We may need additional funds in the future, which may not be available and which may result in dilution of the value of our common
stock
In the future, we may need to raise additional funds, which may not be available on favorable terms, if at all. If adequate funds are not
available on acceptable terms, we may be unable to fund our business growth plans. In
38