eTrade 2006 Annual Report Download - page 99

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2001 Restructuring Plan
In August 2001, the Company announced a restructuring plan (“2001 Restructuring Plan”) aimed at
streamlining operations primarily by consolidating facilities in the United States and Europe. The restructuring
was designed to consolidate certain facilities, bring together key decision-makers and streamline operations. The
original 2001 restructuring charge related to facility consolidation represents the undiscounted value of ongoing
lease commitments, offset by anticipated third-party sublease revenues, the write-off of capitalized software,
hardware and other fixed assets and other costs. Subsequent to 2001, the Company recognized additional facility
consolidation adjustments, as a result of updated estimates of sublease income and sublease start dates, driven by
economic circumstances. The rollforward of the 2001 Restructuring Plan reserve is presented below (dollars in
thousands):
Facility
Consolidation
Asset
Write-Off Other Total
Total 2001 Restructuring Reserve, originally recorded in 2001: $128,469 $ 52,532 $ 21,764 $ 202,765
Activity through December 31, 2004:
Adjustment and additional charges 21,404 2,072 3,499 26,975
Cash payments (98,370) (67) (19,287) (117,724)
Non-cash charges (41,263) (53,877) (5,810) (100,950)
Restructuring liabilities at December 31, 2004 10,240 660 166 11,066
Activity for the year ended December 31, 2005:
Adjustment and additional charges 543 (220) 773 1,096
Cash payments (3,328) (440) (147) (3,915)
Restructuring liabilities at December 31, 2005 7,455 — 792 8,247
Activity for the year ended December 31, 2006:
Adjustment and additional charges (732) — 365 (367)
Cash payments (2,030) — (1,073) (3,103)
Total facility restructuring liabilities at
December 31, 2006 $ 4,693 $ — $ 84 $ 4,777
Other Exit Activities
Toward the end of the second quarter of 2006, the Company decided to relocate certain functions out of the
state of California. As a result, the Company incurred costs of $29.2 million for the year ended
December 31, 2006 related to severance costs for employees impacted by the facility closings and costs for
exiting those facilities. Additionally, for the year ended December 31, 2006, other exit activities included
severance costs associated with the outsourcing of certain clearing operations and costs related to the relocation
of certain accounting functions. The total charge for this exit activity is expected to be between $30.0 million and
$35.0 million, all of which will be recorded in the retail segment.
For the year ended December 31, 2005, other exit activities were primarily related to the liquidation of the
E*TRADE Money Market Funds, partially offset by the revision of previous estimates of various exit activities.
The liquidation costs primarily related to customer notification, severance and reimbursement of losses taken on
sales of securities.
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