eTrade 2006 Annual Report Download - page 95

acquired, $269.7 million in customer list and noncompete intangibles, $9.0 million in contracts and employee
termination liabilities, with the remaining $1,062.4 million recorded as goodwill. Regulatory capital of
$294.5 million was included in the purchase price. The intangible assets will be amortized over approximately
21 years on an accelerated basis.
Harrisdirect
On October 6, 2005, the Company completed its acquisition of Harrisdirect, a U.S.-based online discount
brokerage business with approximately 425,000 customer accounts, from BMO Financial Group for an aggregate
purchase price of approximately $709.0 million in cash. At acquisition, the purchase price included
approximately $22.3 million in net assets acquired, $156.4 million in customer list and noncompete intangibles,
$11.1 million in contract and employee termination liabilities, with the remaining $541.4 million recorded as
goodwill. Regulatory capital of $16.0 million was included in the purchase price. The intangible assets will be
amortized over approximately 19 years on an accelerated basis.
Wealth Management Advisors
The Company acquired Kobren on November 2, 2005 and Howard Capital on January 1, 2005. Both
companies are registered investment advisory firms. At acquisition, the companies combined had over
$1.5 billion in assets under management. The Company recorded $24.6 million of intangible assets and
$7.6 million of goodwill related to the acquisitions. The intangible assets will be amortized over approximately
20 years on an accelerated basis. In accordance with the terms of the acquisitions, the Company may pay
additional cash and stock if certain revenue and earnings targets are met. The Company estimates it will pay an
additional $33.0 million related to these milestones, based on the most current projections.
2004 Acquisitions
Active Accounts
In keeping with our strategy to grow through both strategic acquisitions and organic growth, in October
2004 the Company acquired certain active accounts from a brokerage company. At acquisition, the Company
paid $17.0 million in cash and recorded an intangible asset of $17.0 million which will be amortized over
approximately 10 years on an accelerated basis.
NOTE 3—DISCONTINUED OPERATIONS
In 2006, the Company completed the sale of E*TRADE Professional Trading, LLC. In 2005, the Company
sold its Consumer Finance Corporation and exited the institutional proprietary trading business conducted by
E*TRADE Professional Securities, LLC. In 2004, the Company completed the sale of substantially all of the
assets and liabilities of E*TRADE Access, the company that previously owned its ATM network. All of these
transactions, except Consumer Finance Corporation’s servicing operations, were accounted for as discontinued
operations as of December 31, 2006, 2005 and 2004.
Below is a table summarizing the gains (losses), net of taxes, resulting from the sale and closure of
discontinued operations (dollars in thousands):
Year Ended December 31,
2006 2005 2004
E*TRADE Professional(1) $2,593 $(2,421) $ —
Consumer Finance Corporation-origination business(2)(3) 173 6,444 —
E*TRADE Access(2) — — 31,408
Gain, net of tax, on disposal of discontinued operations $2,766 $ 4,023 $31,408
(1) The sale of E*TRADE Professional Trading, LLC and the exit of the institutional proprietary trading business conducted by E*TRADE
Professional Securities, LLC were included in the results of the institutional segment.
(2) The sales of Consumer Finance Corporation and E*TRADE Access were included in the results of the retail segment.
(3) The gain on the servicing business, which was not accounted for as a discontinued operation, is recorded in facility restructuring and
other exit activities.
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