eTrade 2005 Annual Report Download - page 128

Table of Contents
Consumer Finance Corporation
On October31, 2005, the Company completed the sale of the origination and servicing business of Consumer Finance Corporation to
GE Capital. The servicing business exited did not qualify as a discontinued operation; however, the origination business is accounted
for as a discontinued operation. The sale resulted in a pre-tax gain of $46.1 million upon close, $35.5 million relating to the servicing
business and $10.6 million ($6.4 million, net of tax), relating to the origination business.
The Company will not have significant continuing involvement in the operations of the servicing business but will continue to have
significant cost-generating activities in the form of a servicing agreement. As such, the servicing business did not qualify as a
discontinued operation. The Company will not have significant continuing involvement in the operations of the origination business
and will not continue any significant revenue-producing or cost-generating activities of the origination business. Therefore, the results
of operations, net of income taxes, of this origination business are presented as discontinued operations on the Company’s
consolidated statements of income for all periods presented.
The following table summarizes the results of discontinued operations for the origination business (in thousands):
Year ended December31,
2005
2004
2003
Net revenues
$
(7,750
)
$
(5,898
)
$
47,318
Income (loss) from discontinued operations before income taxes
$
(22,959
)
$
(36,630
)
$
18,912
Income tax expense (benefit)
(8,783
)
(15,082
)
7,432
Net income (loss) from discontinued operations
$
(14,176
)
$
(21,548
)
$
11,480
E*TRADE Professional
On May9, 2005, the Company closed E*TRADE Professional Securities, LLC (“ETPS”), a unit that conducted proprietary trading
operations. In June 2005, the Company filed to withdraw its broker-dealer license for ETPS, with an effective date of May31, 2005. ETPS
was a Philadelphia Stock Exchange (“PHLX”) member and a standalone entity which employed less than 200 traders. This closure
resulted in a $2.4 million, net of tax, loss on disposal of discontinued operations, which included employee terminations, facility closure
and impairment of goodwill and intangibles.
In December 2005, the Company decided to sell its professional agency business, E*TRADE Professional Trading, LLC (“ETPT”.) This
business includes a broker-dealer registered with the SEC and a member of the NASD Inc. (“NASD”) who currently executes and clears
its customer security transactions through an affiliate, E*TRADE Clearing LLC, on a fully disclosed basis under an introducing
broker-dealer relationship. The Company executed a sale agreement on February17, 2006. Under the terms of the sale agreement, the
Company continues to retain the obligation for contingent liabilities that existed prior to the sale, which contingent liabilities would
not, in the Company’s estimation individually or collectively, be material to the Company’s financial results.
The Company will not have significant continuing involvement in the operations of either its proprietary trading or its professional
agency businesses and will not continue any significant revenue-producing or cost-generating activities of these businesses.
Therefore, the Company’s results of operations, net of income taxes, include these businesses as discontinued operations on the
Company’s consolidated statements of income for all periods presented.
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2006. EDGAR Online, Inc.