eTrade 2009 Annual Report Download - page 5

maintaining our competitive position with this customer group. Our long-term investing customer group is less
developed when compared to our trading customers and represents our largest opportunity for future growth.
We believe our focus on certain key factors will enable us to execute our strategy of profitably growing our
trading and investing business. These key factors include the development of innovative online trading and long-
term investing products and services, a concerted effort to deliver superior customer service, creative and
cost-effective marketing and sales, and expense discipline. In addition, we continue to invest significantly for
long-term growth so that we remain competitive among the largest online brokers.
In addition to focusing on our customer franchise, our strategy includes an intense focus on addressing the
balance sheet issues primarily caused by the mortgage crisis. We are focused on improving our capital structure
as well as mitigating the credit losses inherent in our loan portfolio. We believe the recapitalization transactions
executed in the second and third quarters of 2009 significantly improved our capital structure and better
positioned the Company for future growth.
RECAPITALIZATION TRANSACTIONS
During the second and third quarters of 2009, the Company executed a series of transactions as part of a
comprehensive plan to strengthen our capital structure. We raised $733 million in net proceeds from three
separate stock offerings: $63 million from the Equity Drawdown Program in May 2009; $523 million from the
Public Equity Offering in June 2009; and $147 million from the At the Market Offering in September 2009. In
connection with these stock offerings, 621 million shares of common stock were issued.
We also exchanged $1.7 billion aggregate principal amount of interest-bearing corporate debt for an equal
principal amount of newly-issued non-interest-bearing convertible debentures (“Debt Exchange”). As a result of
the Debt Exchange, we reduced our annual corporate interest payments by approximately $200 million and
eliminated any substantial debt maturities until 2013.
Subsequent to the Debt Exchange, $720.9 million, or 41%, of convertible debentures were converted into
697 million shares of common stock during the third and fourth quarters of 2009.
DISPOSITIONS AND EXIT ACTIVITIES
In the fourth quarter of 2009, we decided to restructure our international brokerage business, which provides
trading products and services through two primary channels: 1) cross-border trading, where customers residing
outside of the U.S. trade in U.S. securities; and 2) local market trading, where customers residing outside of the
U.S. trade in non-U.S. securities.
We believe cross-border trading is a key strategic component of our global brokerage product offering and
plan to continue to offer trading products and services through this channel. We believe local market trading is
not a key strategic component of our global brokerage product offering; therefore, we decided to exit this
channel. We have entered into agreements to sell the local market trading operations in Germany, the Nordic
region, and the United Kingdom. The sale of the German operations closed in 2009 and we expect to complete
the Nordic and United Kingdom transactions during 2010.
PRODUCTS AND SERVICES
Trading and Investing
Our trading and investing segment offers a full suite of financial products and services to individual retail
investors. The most significant of these products and services are described below:
Trading Products and Services
• automated order placement and execution of U.S. equities, futures, options, exchange-traded funds and
bond orders;
2