eTrade 2005 Annual Report Download - page 53

Table of Contents
In addition, the growth in expenses was partially offset by the following:
•
The sale of the Consumer Finance servicing business which resulted in a credit to facility restructuring and other exit activities
of $35.5 million. See dispositions and Notes 3 and 4 to the Consolidated Financial Statements for more information.
•
The favorable settlement of the Nomura litigation reduced other expenses by $35.0 million. See Legal Proceedings for more
details regarding the settlement.
Other Income
As shown in the following table, other income decreased 62% to $26.3 million in 2005 compared to 2004 (dollars in thousands):
Year Ended December31,
Variance
2005 vs. 2004
2005
2004
2003
$ Amount
%
Other income:
Corporate interest income
$
11,043
$
6,692
$
6,550
$
4,351
65
%
Corporate interest expense
(73,956
)
(47,525
)
(45,596
)
(26,431
)
(56
)
%
Gain on sale and impairment of investments
83,144
128,111
147,874
(44,967
)
(35
)
%
Loss on early extinguishment of debt
—
(22,972
)
—
22,972
*
Equity in income of investments and venture funds
6,103
4,382
9,132
1,721
39
%
Total other income
$
26,334
$
68,688
$
117,960
$
(42,354
)
(62
)
%
*
Percentage not meaningful
Other income decreased $42.4 million in 2005 compared to 2004 primarily due to lower gain on the sale and impairment of investments of
$45.0 million and higher corporate interest expense of $26.4 million resulting from an increase in acquisition-related senior notes in 2005,
partially offset by the $23.0 million loss on early extinguishment of debt in 2004. During 2005, we sold shares of our investments in
Softbank Investment Corporation (“SBI”), Archipelago Holdings, Ameritrade Holding Corporation and International Stock Exchange
resulting in gains of $82.7 million. During 2004, gain on sale and impairment of investments was primarily related to gain on sale of our
investments in SBI in the amount of $130.6 million. The $49.3 million decrease in other income in 2004 compared to 2003 resulted from
the loss on early extinguishment of debt of $23.0 million and lower gain on sale and impairment of investments of $19.8 million in 2003.
Income Tax Expense
Income tax expense from continuing operations increased 26% to $229.8 million in 2005 from 2004. The increase in income tax expense is
principally related to the increase in pre-tax income over the comparable periods. Our effective tax rate for 2005 was 34.0% compared to
32.2% for 2004. The lower effective tax rate in 2004 was principally due to tax benefits recognized in 2004 in connection with the sale of
partnership interests which generated an excess tax basis adjustment and the closure of several open IRS tax issues. We currently
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2006. EDGAR Online, Inc.