eTrade 2004 Annual Report Download - page 138

Table of Contents
Index to Financial Statements
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 collective obligation of the corporation does not change by the existence of corporate guarantees. Rather, the
guarantees shift ultimate payment responsibility of an existing financial obligation from a subsidiary to the parent company.
In support of the Company’s brokerage business, the Company has provided guarantees on the settlement of its subsidiaries’ financial
obligations with several financial institutions related to its securities lending activities. Terms and conditions of the guarantees, although
typically undefined in the guarantees themselves, are governed by the conditions of the underlying obligation that the guarantee covers. Thus,
the Company’s obligation to pay under these guarantees coincides exactly with the terms and conditions of those underlying obligations. At
December 31, 2004, no claims had been filed with the Company for payment under any guarantees. These guarantees are not collateralized.
In addition to guarantees issued on behalf of subsidiaries participating in securities lending programs, the Company also 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, 2004, no claims had been made on the Company under these guarantees and thus, no
obligations had been recorded. These guarantees are not collateralized.
NOTE 31—SUBSEQUENT EVENTS
Israel Exit Activity
As disclosed in the Company’s Form 8-K filed on February 4, 2005, the Company, in October 2004 participated in an arbitration
proceeding against its former Israeli licensee. On February 1, 2005, the Company received notice of partial award to the licensee. As a result,
the Company recorded a charge to facility restructuring and other exit charges of $14.5 million for 2004. For further discussion see Notes 22
and 26.
Acquisition of Advisory Firm
In October 2004, the Company entered into an agreement to purchase a registered investment advisory firm with over $500 million in
assets under management, which provides asset management services and general wealth advice to individuals. The transaction closed in
January 2005 and the purchase price is expected to be up to approximately $12.0 million.
NOTE 32—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 periods presented (in thousands, except per share amounts):
128
2004 2003
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Net revenues
$
400,475
$
380,853
$
337,137
$
409,521
$
312,420
$
369,166
$
385,943
$
371,270
Income from continuing operations
$
89,585
$
91,605
$
79,837
$
89,903
$
19,660
$
13,893
$
62,283
$
108,856
Net income
$
88,475
$
122,905
$
79,274
$
89,829
$
21,482
$
12,687
$
61,403
$
107,455
Income per share from continuing operations
Basic
$
0.24
$
0.25
$
0.21
$
0.24
$
0.06
$
0.04
$
0.17
$
0.30
Diluted
$
0.23
$
0.24
$
0.21
$
0.24
$
0.06
$
0.03
$
0.17
$
0.27
Income per share:
Basic
$
0.24
$
0.34
$
0.21
$
0.24
$
0.06
$
0.04
$
0.17
$
0.30
Diluted
$
0.23
$
0.31
$
0.21
$
0.24
$
0.06
$
0.03
$
0.17
$
0.27