eTrade 2008 Annual Report Download - page 109

NOTE 3—DISCONTINUED OPERATIONS
In 2008, the Company sold its Canadian brokerage business and exited its direct retail lending business. In
2006, the Company completed the sale of E*TRADE Professional Trading, LLC. Results of operations from
these businesses have been reclassified to discontinued operations for the years ended December 31, 2008, 2007
and 2006.
Sale of Canadian Brokerage Business
The Company made the decision to sell its Canadian brokerage business and completed the sale to
Scotiabank in 2008. The transaction resulted in a pre-tax gain of $429.0 million and associated income tax
expense of $160.2 million. The Company does not have significant continuing involvement in the Canadian
brokerage business, and its operations and cash flows have been eliminated from the ongoing operations of the
Company. As a result, the Canadian brokerage business qualifies as a discontinued operation, in accordance with
SFAS No. 144. The Company’s results of operations, net of income tax, include the Canadian brokerage business
as a discontinued operation on the Company’s consolidated statement of income (loss) for all periods presented.
Prior to the Canadian brokerage business being recorded as a discontinued operation, it was included in the
results of operations of both the retail and institutional segments.
The following table summarizes the results of discontinued operations for the Canadian brokerage business
(dollars in thousands):
For the year ended December 31,
2008 2007 2006
Net revenue $ 59,404 $85,175 $62,157
Income from discontinued operations before income tax expense
(benefit) $ 15,558 $33,032 $20,986
Income tax expense (benefit) (19,473) 10,837 6,921
Income from discontinued operations, net of tax $ 35,031 $22,195 $14,065
Exit of the Direct Retail Lending Business
In 2008, the Company exited its direct retail lending business, which was the Company’s last remaining
loan origination channel (the Company exited the wholesale mortgage lending business in 2007). As such, the
entire direct retail lending business, including the wholesale mortgage lending business, met the requirements
under SFAS No. 144 to be recorded and reported as discontinued operations. The operations and cash flows of
the direct retail lending business have been eliminated from the ongoing operations of the Company and the
Company did not have any significant continuing involvement in the direct retail lending business after its
closure. Therefore, the Company’s results of operations, net of income tax, include direct retail lending business
as a discontinued operation on the Company’s consolidated statement of income (loss) for all periods presented.
Prior to the direct retail lending business being recorded as a discontinued operation, it was included in the
results of operations of the retail segment.
The following table summarizes the results of discontinued operations for the direct retail lending business
(dollars in thousands):
For the year ended December 31,
2008 2007 2006
Net revenue $ 1,300 $ 10,001 $ 32,986
Loss from discontinued operations before income tax benefit $(9,932) $(35,450) $(24,510)
Income tax benefit (3,697) (13,838) (10,328)
Loss from discontinued operations, net of tax $(6,235) $(21,612) $(14,182)
106