eTrade 2009 Annual Report Download - page 47

Facility Restructuring and Other Exit Activities
Facility restructuring and other exit activities expense was $29.5 million for the year ended December 31,
2008. These costs were due primarily to the exit of certain facilities during the year ended December 31, 2008.
Slightly offsetting the restructuring expense is the gain on the sale of RAA of $2.8 million which was recorded in
the second quarter of 2008.
Other Operating Expenses
Other operating expenses decreased 48% to $90.9 million for the year ended December 31, 2008 compared
to 2007, which was primarily due to items that are not expected to recur in future periods. During the first quarter
of 2008, we sold our corporate aircraft related assets, which resulted in a $23.7 million gain on sale. During the
second quarter of 2008, we realized approximately $13 million of insurance recoveries of fraud losses incurred in
prior periods as well as other recoveries to legal reserves. The decrease is also due to $35.1 million in expense
recorded for certain legal and regulatory matters for the year ended December 31, 2007.
Other Income (Expense)
Other income (expense) was an expense of $330.6 million for 2008 compared to an expense of
$123.1 million for 2007. Total other income (expense) for the year ended December 31, 2008 consisted primarily
of corporate interest expense resulting from our corporate debt, which included the springing lien notes, senior
notes and mandatory convertible notes. Corporate interest expense increased 110% to $362.2 million for the year
ended December 31, 2008 compared to 2007, primarily due to the interest expense on the springing lien notes
that were issued in the fourth quarter of 2007 and first quarter of 2008. During 2008, our wholly owned
subsidiary, E*TRADE Mauritius, sold its equity shares in Investsmart for proceeds of approximately $145
million, which resulted in a gain on sale of $22.3 million recorded in equity in income of investments and
venture funds. During 2007, we sold our investments in E*TRADE Australia and E*TRADE Korea, which
resulted in $37.0 million in gain on sales of investments, net.
The gain on early extinguishment of debt is primarily due to a gain of $21.5 million recognized on the
exchange of our senior notes for shares of our common stock for the year ended December 31, 2008. The gain of
$21.5 million is offset by a loss of $10.8 million related to the early extinguishment of FHLB advances and a loss
of $0.6 million on the prepayment of debt related to the sale of the corporate aircraft.
Income Tax Benefit
The income tax benefit from continuing operations was $469.5 million and $732.9 million for the years
ended December 31, 2008 and 2007, respectively. Our effective tax rate for 2008 was (36.7)% compared to
(33.7)% for 2007. Our 2008 effective tax rate included a number of tax benefits and expenses which were
incremental to the amount of tax accrued based on the statutory tax rates in the jurisdictions in which we operate.
During the year ended December 31, 2008 we did not provide for a valuation allowance against our federal
deferred tax assets as we believed that it was more likely than not that all of these assets will be realized. Our
evaluation focused on identifying significant, objective evidence that we will be able to realize our deferred tax
assets in the future. Our analysis of the need for a valuation allowance recognized that we were in a cumulative
book taxable loss position as of the three-year period ended December 31, 2008, which is considered significant,
objective evidence that we may not be able to realize some portion of our deferred tax assets in the future.
However, we believed we were able to rely on our forecasts of future taxable income and overcome the
uncertainty created by the cumulative loss position.
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