eTrade 2005 Annual Report Download - page 126

Table of Contents
Co. for an aggregate purchase price of approximately $1.6 billion in cash. The purchase price included approximately $306.6 million in
net assets acquired, $269.7 million in customer list and noncompete intangibles, $9.0 million in contracts and employee termination
liabilities, with the remaining $1,062.4 million recorded as goodwill. Regulatory capital of $294.5 million was included in the purchase
price. The intangible assets will be amortized over approximately 22 years on an accelerated basis.
Harris
direct
On October6, 2005, the Company completed its acquisition of Harris
direct
LLC (“Harris
direct
”), a U.S.-based online discount
brokerage business with approximately 425,000 customer accounts, from BMO Financial Group for an aggregate purchase price of
approximately $709.0 million in cash. The purchase price included approximately $22.4 million in net assets acquired, $156.4 million in
customer list and noncompete intangibles, $11.1 million in contract and employee termination liabilities, with the remaining $541.4
million recorded as goodwill. Regulatory capital of $16.0 million was included in the purchase price. The intangible assets will be
amortized over approximately 19 years on an accelerated basis.
Wealth Management Advisors
The Company acquired Kobren Insight Management on November2, 2005 and Howard Capital Management, Inc. on January1, 2005.
Both companies are registered investment advisory firms. The companies combined have over $1.5 billion in assets under management.
The Company recorded $24.6 million of intangible assets and $7.6 million of goodwill related to the acquisitions. The intangible assets
will be amortized over approximately 20 years on an accelerated basis. In accordance with the terms of the acquisitions, the Company
may pay additional cash and stock if certain milestones are met. These milestones are for certain revenues and earnings targets, which
if met, will cause the Company to pay up to an additional $34.6 million.
Active Accounts
In October 2004, the Company acquired certain active accounts from a brokerage company. The Company paid $17.0 million in cash
and recorded an intangible asset of $17.0 million which will be amortized over 10 years.
NOTE 3—DISCONTINUED OPERATIONS
In 2005, the Company sold its Consumer Finance Corporation, exited the institutional proprietary trading business conducted by
E*TRADE Professional Securities, LLC and announced its intention to sell its professional agency business which conducts its
activities as E*TRADE Professional Trading, LLC. In 2004, the Company’s retail segment completed the sale of substantially all of the
assets and liabilities of E*TRADE Access, the company that previously owned its ATM network. All of these transactions and
intended transactions, except the Consumer Finance Corporation’s servicing operations, were accounted for as discontinued
operations as of December31, 2005, 2004 and 2003.
Below is a table summarizing the gains (losses), net of taxes, resulting from the sale and closure of discontinued operations (in
thousands):
YearendedDecember31,
2005
2004
Consumer Finance Corporation—origination business
(1)
$
6,444
$
—
E*TRADE Professional
(2,421
)
—
E*TRADE Access
—
31,408
Total net gain from sale of discontinued operations
$
4,023
$
31,408
(1)
The gain on the servicing business, which was not accounted for as a discontinued operation, is recorded in facility restructuring and other exit activities.
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2006. EDGAR Online, Inc.