eTrade 2012 Annual Report Download - page 45

Other Income (Expense)
Other income (expense) increased 192% to $513.7 million for the year ended December 31, 2012
compared to 2011 as shown in the following table (dollars in millions):
Variance
Year Ended December 31, 2012 vs. 2011
2012 2011 Amount %
Corporate interest income $ 0.1 $ 0.7 $ (0.6) *
Corporate interest expense (179.9) (177.8) (2.1) 1%
Gains (losses) on early extinguishment of debt:
Corporate debt (256.9) 3.1 (260.0) *
Wholesale borrowings (78.3) — (78.3) *
Equity in income (loss) of investments and venture funds 1.3 (1.8) 3.1 *
Total other income (expense) $(513.7) $(175.8) $(337.9) 192%
* Percentage not meaningful.
Total other income (expense) included corporate interest expense on interest-bearing corporate debt for the
years ended December 31, 2012 and 2011. Corporate interest expense increased 1% to $179.9 million for the
year ended December 31, 2012 compared to 2011.
In addition, for the year ended December 31, 2012, $256.9 million in losses on early extinguishment of
corporate debt were recorded, as a result of the early extinguishment of all of the 12
1
⁄ 2 % Springing lien notes and
7
7
⁄ 8 % Notes during 2012. We also had $78.3 million in losses on early extinguishment of wholesale borrowings
as a result of the early extinguishment of approximately $1.1 billion in wholesale borrowings during 2012.
During the year ended December 31, 2011, we had $3.1 million in gains on early extinguishment of debt related
to the call of the 7
3
⁄ 8 % senior notes due September 2013 (“7
3
⁄ 8 % Notes”) in the second quarter of 2011.
Income Tax Expense (Benefit)
Income tax benefit was $(18.4) million for the year ended December 31, 2012 compared to tax expense of
$28.6 million in 2011. The effective tax rate was (14.0)% for the year ended December 31, 2012 compared to
15.4% in 2011.
During the first quarter of 2012, we 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 in the first quarter of 2012, we identified that a portion of those losses were incorrectly treated as non-
deductible in 2009 and were deductible for tax purposes. The $26.3 million tax benefit resulted in a
corresponding increase to the net deferred tax asset.
In November 2012, California voters approved Proposition 39, which requires most multistate taxpayers to
use a sales factor-only apportionment formula, combined with market–based sourcing for sales, other than sales
of tangible personal property, effective for years beginning on or after January 1, 2013. As a result, the overall
California apportionment for the company’s unitary group decreased significantly and we expect this will
decrease our taxable income in California in future periods. As a result, we no longer expect to utilize net
operating losses in California and we recognized tax expense of $25.1 million consisting of establishing
valuation allowances for California net operating losses, research and development credits and other deferred tax
assets.
During the third quarter of 2011, we recorded an income tax benefit of $61.7 million related to the taxable
liquidation of a European subsidiary. The subsidiary was liquidated for U.S. tax purposes in connection with our
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