eTrade 2012 Annual Report Download - page 178

Parent Company Guarantees
Guarantees are contingent commitments issued by the Company for the purpose of guaranteeing the
financial obligations of a subsidiary to a financial institution. The financial obligations of the Company and the
relevant subsidiary do not change by the existence of a corporate guarantee. Rather, upon the occurrence of
certain events, the guarantee shifts ultimate payment responsibility of an existing financial obligation from the
relevant subsidiary to the guaranteeing parent company.
The Company issues guarantees for the settlement of foreign exchange transactions. If a subsidiary fails to
deliver currency on the settlement date of a foreign exchange arrangement, the beneficiary financial institution
may seek payment from the Company. Terms are undefined, and are governed by the terms of the underlying
financial obligation. At December 31, 2012, no claims had been made against the Company for payment under
these guarantees and thus, no obligations have been recorded. None of these guarantees are collateralized.
NOTE 22—QUARTERLY DATA (UNAUDITED)
The information presented below reflects all adjustments, which, in the opinion of management, are of a
normal and recurring nature necessary to present fairly the results of operations for the quarterly periods
presented (dollars in thousands, except per share amounts):
2012 2011
First Second Third Fourth First Second Third Fourth
Total net revenue $489,397 $452,408 $490,035 $ 467,656 $536,695 $517,619 $507,275 $475,010
Net income (loss) $ 62,591 $ 39,510 $ (28,625) $(186,059) $ 45,233 $ 47,118 $ 70,696 $ (6,346)
Earnings (loss) per
share:
Basic $ 0.22 $ 0.14 $ (0.10) $ (0.65) $ 0.20 $ 0.18 $ 0.25 $ (0.02)
Diluted $ 0.22 $ 0.14 $ (0.10) $ (0.65) $ 0.16 $ 0.16 $ 0.24 $ (0.02)
During the three months ended March 31, 2012, the Company recorded an income tax benefit of
$26.3 million related to certain losses on the 2009 Debt Exchange that were previously considered non-
deductible. Through additional research completed during the three months ended March 31, 2012, the Company
identified that a portion of those losses were incorrectly treated as non-deductible in 2009 and are deductible for
tax purposes. As a result of this finding, the Company recorded an income tax benefit and a corresponding
increase to deferred tax assets during the three months ended March 31, 2012.
In the third quarter of 2012, the net loss was due to an increase in the provision for loan losses of
$50 million as a result of newly identified bankruptcy filings.
In the fourth quarter of 2012, the net loss was primarily due to the early extinguishment of all the 12
1
⁄ 2 %
Springing lien notes and 7
7
⁄ 8 % Notes that resulted in losses on early extinguishment of debt of $256.9 million.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of the
Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934
(“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual
report, have concluded that our disclosure controls and procedures are effective based on their
evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or
15d-15.
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