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E*TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Year Ended December 31,
2006 2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 628,859 $ 430,412 $ 380,483
Adjustments to reconcile net income to net cash provided by
operating activities:
Cumulative effect of accounting change, net of tax — (1,646) —
Provision for loan losses 44,970 54,016 38,121
Depreciation and amortization (including discount amortization
and accretion) 286,841 362,965 398,297
Gain on sales and impairment of investments (125,953) (174,798) (257,465)
Loss (gain) on disposition of assets — 1,342 (57,451)
Gain on sale of Consumer Finance Corporation — (46,099) —
Minority interest in subsidiaries and equity in income of
investments and venture funds (2,451) (6,289) (4,469)
Non-cash facility restructuring costs and other exit activities 20,712 6,528 15,029
Stock-based compensation 32,635 18,253 4,654
Tax benefit from tax deductions in excess of compensation
expense (30,166) (24,530) (22,441)
Other 11,650 (8,474) 11,503
Net effect of changes in assets and liabilities:
Decrease in cash and investments required to be segregated
under Federal or other regulations 356,394 518,021 936,492
Increase in brokerage receivables (430,401) (953,391) (713,656)
Increase (decrease) in brokerage payables 441,784 339,132 (117,567)
Proceeds from sales, repayments and maturities of loans
held-for-sale 1,506,896 7,182,775 6,857,431
Purchases of loans held-for-sale (1,836,108) (3,717,745) (6,063,974)
Proceeds from sales, repayments and maturities of trading
securities 1,943,977 3,779,503 9,354,027
Purchases of trading securities (1,978,828) (6,751,698) (9,122,071)
Increase in other assets (168,365) (37,878) (94,199)
Increase (decrease) in accounts payable, accrued and other
liabilities 194,957 (108,610) 63,786
Facility restructuring liabilities (16,325) (5,053) (11,564)
Net cash provided by operating activities 881,078 856,736 1,594,966
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale mortgage-backed and investment
securities (15,416,233) (14,320,762) (20,733,706)
Proceeds from sales, maturities of and principal payments on
available-for-sale mortgage-backed and investment securities 14,181,506 14,059,538 18,014,996
Net increase in loans receivable (6,969,132) (7,887,040) (3,487,941)
Purchases of property and equipment (109,493) (79,014) (108,887)
Proceeds from sale of property and equipment — — 5,957
Cash used in business acquisitions, net(1)(2) (806) (2,218,932) (19,025)
Net cash flow from derivatives hedging assets (64,600) (34,696) (33,354)
Proceeds from sales of discontinued businesses 3,470 56,902 106,868
Other (46,744) 19,376 1,613
Net cash used in investing activities $ (8,422,032) $(10,404,628) $ (6,253,479)
(1) In 2006, cash used in business acquisitions was related to the BrownCo purchase price true-up based on the final acquisition balance
sheet and acquisition of RAA.
(2) In 2006, we acquired a small thrift for $2.1 million. Along with the acquisition we received $17.8 million in cash and cash equivalents.
See accompanying notes to consolidated financial statements
79