eTrade 2007 Annual Report Download - page 102

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Below is a table summarizing the gains (losses), net of taxes, resulting from the sale and closure of
discontinued operations (dollars in thousands):
Year Ended
December 31,
2006 2005
E*TRADE Professional(1) $2,593 $(2,421)
Consumer Finance Corporation-origination business(2) 173 6,444
Gain, net of tax, on disposal of discontinued operations $2,766 $ 4,023
(1) The sale of E*TRADE Professional Trading, LLC and the exit of the institutional proprietary trading business conducted by E*TRADE
Professional Securities, LLC were included in the results of the institutional segment.
(2) The sale of Consumer Finance Corporation was included in the results of the retail segment. The gain on the servicing business, which
was not accounted for as a discontinued operation, is recorded in facility restructuring and other exit activities.
E*TRADE Professional Securities, LLC and E*TRADE Professional Trading, LLC
In May 2005, the Company closed E*TRADE Professional Securities, LLC, a unit that conducted
proprietary trading operations. This closure resulted in a $2.4 million loss, net of tax, on disposal of discontinued
operations, which included employee terminations, facility closure and impairment of goodwill and other
intangibles. In December 2005, the Company decided to sell its professional agency business, E*TRADE
Professional Trading, LLC. The Company executed and settled this transaction during the year ended
December 31, 2006 and recorded approximately $2.6 million in gain, net of tax, on the sale.
The Company does not have significant continuing involvement in the operations of either its proprietary
trading or its professional agency businesses and does 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 statement of income for all
periods presented.
The following table summarizes the results of discontinued operations for the proprietary and agency
trading businesses (dollars in thousands):
Year Ended
December 31,
2006 2005
Net revenue $ 5,526 $ 21,408
Loss from discontinued operations $(1,181) $(11,103)
Income tax benefit (460) (3,784)
Loss from discontinued operations, net of tax $ (721) $ (7,319)
Consumer Finance Corporation
In October 2005, the Company completed the sale of the servicing and origination businesses of Consumer
Finance Corporation. The exit of the servicing business did not qualify as a discontinued operation; however, the
origination business did qualify 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. In September 2006, the Company finalized certain post sale contingencies with the
purchaser which resulted in a $0.2 million gain, net of tax.
The Company has not had significant continuing involvement in the operations of the servicing business but
continues to have significant cost-generating activities in the form of a servicing agreement. As such, the
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