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Securitization Income. When beneficial interests in securitized receivables were issued to third-party investors, the
Company recognized a gain on the transfer of the loan receivables. The amount of the gain depended in part on the
previous carrying amount of the assets involved in the transfer, allocated between the assets transferred and the retained
interests based upon their relative fair values at the date of the transfer. An interest-only strip receivable was recorded in
the consolidated statements of financial condition and represented the contractual right to receive interest and certain
other revenue less certain costs, including charge-offs on securitized loans and the interest paid to investors in the
securitization transactions (“the excess spread”) from the trust over the estimated life of the securitized loan receivables.
The interest-only strip receivable was recorded at its estimated fair value with subsequent changes in fair value recorded
in securitization income. The Company estimated the fair value of the interest-only strip receivable based on the present
value of expected future cash flows using management’s best estimate of the key assumptions, including forecasted
interest yield, loan losses and payment rates, the interest rate paid to investors and a discount rate commensurate with the
risks involved. The recognition of securitization income from the actual net excess cash flows accrued was offset in part by
the revaluation of the interest-only strip receivable such that the interest-only strip receivable reflected only future excess
cash flows. Also included in securitization income was the annual servicing fee the Company received based on a
percentage of the investor interest outstanding. The Company did not recognize servicing assets or servicing liabilities for
servicing rights since the servicing fee approximated adequate compensation to the Company for performing the
servicing. In addition, the Company, in accordance with governing securitization documents, allocated portions of
discount and interchange revenue to all credit card securitization transactions, which was also recognized as
securitization income. Securitization transaction costs were deferred and amortized to securitization income over the life
of the related transactions.
4. Discontinued Operations
On March 31, 2008, the Company completed the sale of the Goldfish business, previously reported as the
International Card segment, to Barclays Bank PLC. The aggregate sale price under the agreement was £35 million
(equivalent to approximately $70 million), which was paid in cash at closing.
The following table provides summary financial information for discontinued operations related to the sale of the
Company’s Goldfish business (dollars in thousands):
For the Year Ended
November 30,
2008
Revenues(1) .............................................................................................................................................................................. $ 130,935
Income from discontinued operations........................................................................................................................................... $ 50,505
Loss on the sale of discontinued operations(2) ................................................................................................................................ (225,289)
Pretax loss from discontinued operations ...................................................................................................................................... (174,784)
Income tax benefit(4) .................................................................................................................................................................. (39,621)
Loss from discontinued operations, net of tax ............................................................................................................................. $(135,163)
(1) Revenues are the sum of net interest income and other income.
(2) Loss on the sale of discontinued operations for the year ended November 30, 2008 includes a $27.1 million realization of cumulative foreign currency translation adjustments which were
previously recorded net of tax. As a result, there is no tax impact for the year ended November 30, 2008 related to the realization of cumulative foreign currency translation adjustments.
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