eTrade 2006 Annual Report Download - page 114

Download and view the complete annual report

Please find page 114 of the 2006 eTrade annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 163

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163

The following table discloses the changes in the carrying value of goodwill that occurred in the retail and
institutional segments (dollars in thousands):
Retail Institutional Total
Balance at December 31, 2004 $ 153,720 $241,323 $ 395,043
Additions from 2005 acquisitions 1,611,507 1,421 1,612,928
Write-offs related to discontinued operations (3,379) (1,136) (4,515)
Balance at December 31, 2005 1,761,848 241,608 2,003,456
Purchase accounting adjustments related to 2005
acquisitions 11,953 — 11,953
Additions from 2006 acquisition of RAA(1) 14,116 — 14,116
Additions from equity method investment in
Investsmart 38,668 4,296 42,964
Other adjustments 1,500 (1,069) 431
Balance at December 31, 2006 $1,828,085 $244,835 $2,072,920
(1) Includes purchase accounting adjustments as of December 31, 2006.
The changes in the carrying value of goodwill are the result of the Company’s completion of the purchase of
RAA (see Note 2—Business Combinations for further discussion) and the increased ownership percentage in
Investsmart, resulting in the transition to equity method accounting as discussed in Note 13—Other Assets. In
connection with these transactions, the Company recorded $14.1 million and $43.0 million in goodwill,
respectively. An additional $12.0 million of goodwill, primarily due to purchase accounting adjustments related
to the 2005 acquisitions of BrownCo and Harrisdirect, was also recorded during 2006.
During 2005, the additions to goodwill were the result of our acquisitions including Harrisdirect, BrownCo,
Kobren and Howard Capital. See Note 2—Business Combinations. The write-off of goodwill related to
discontinued operations during 2005 was due to the sale of Consumer Finance Corporation and the exit of
E*TRADE Professional Securities, LLC. See Note 3—Discontinued Operations.
Other intangible assets with finite lives, which are primarily amortized on an accelerated basis, consist of
the following (dollars in thousands):
Weighted
Average
Useful Life
(Years)
December 31, 2006 Weighted
Average
Useful Life
(Years)
December 31, 2005
Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
Accumulated
Amortization
Net
Amount
Customer list 20 $461,639 $ (43,076) $418,563 21 $456,953 $ (11,592) $445,361
Specialist books 30 61,820 (30,641) 31,179 28 61,820 (29,280) 32,540
Active accounts 8 69,023 (50,325) 18,698 8 69,023 (43,234) 25,789
Credit cards(1) — — — — 15 32,604 (12,496) 20,108
Other 6 6,000 (2,507) 3,493 5 29,274 (20,964) 8,310
Total other intangible
assets(2) $598,482 $(126,549) $471,933 $649,674 $(117,566) $532,108
(1) During the year ended December 31, 2006, the Company completed the sale of a portion of its purchased credit card portfolio.
(2) Fully amortized other intangible assets not included in the table above.
As part of the Company’s purchase of RAA, the Company assigned $9.5 million to intangible assets with
finite lives, of which $9.2 million was assigned to the customer list intangible asset class. In addition, the sale of
a portion of the Company’s purchased credit card portfolio resulted in a $16.0 million write-off to the credit card
intangible asset class for the year ended December 31, 2006.
111