No.

13
Finance 400 Case E due February 18, 2013
Appendix Page 1 of 8

DISCOVER FINANCIAL SERVICES (DFS) FINANCIAL STATEMENTS

DISCOVER FINANCIAL SERRIVES ANALYSIS
2008

2009

2010

2011

BALANCE SHEET
(dollars in thousands, except share amounts)
Current Assets
Cash and cash equivalents
######## ######## $5,098,733 $2,849,843
Restricted cash
$0
$643,311 $1,363,758 $1,285,820
Other short-term investments
$0 $1,350,000
$375,000
$0
Investments securities
Available for sale
$1,127,119 $2,645,481 $5,002,579 $6,107,831
Held to maturity
$100,825 $2,389,816
$72,816
$98,222
Total investment securities
$1,227,944 $5,035,297 $5,075,395 $6,206,053
Loan receivables:
Loans held for sale
$0
$0
$788,101
$714,180
Loan portfolio:
Credit card
######## ######## ######## ########
Other
$1,402,304 $3,394,782 $2,891,318 $4,733,742
Purchased credit-impaired loans
$0
$0
$0 $5,250,388
Total loan portfolio
$0
$0 ######## ########
Total loan receivables
######## ######## ######## ########
Allowance for loan losses
-$1,374,585 -$1,757,899 -$3,304,118 -$2,205,196
Net loan receivables
######## ######## ######## ########
Amounts due from asset securitization (receivable) $2,233,600 $1,692,051
$0
$0
Total Current Assets
######## ######## ######## ########
Premises and equipment, net
Goodwill
Intangible assets, net
Other assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Deposits:
Interest-bearing deposit accounts
Non-interest bearing deposit accounts
Total deposits
Short-term borrowings
Long-term borrowings
Special dividend - Morgan Stanley
Accrued expenses and other liabilities
Total Liabilities
Stockholders'' Equity:
Preferred stock

$552,502
$499,303
$460,732
$483,250
$255,421
$255,421
$255,421
$255,421
$203,319
$195,636
$188,973
$188,018
$1,406,427 $1,462,064 $2,434,661 $2,383,793
######## ######## ######## ########

########
$78,375
########
$500,000
$1,735,383
$473,000
$2,737,655
########

########
$64,506
########
$0
$2,428,101
$808,757
$2,255,570
########

########
$103,544
########
$0
########
$0
$2,209,011
########

########
$113,575
########
$50,000
########
$0
$2,677,086
########

$0 $1,158,066

$0

$0

DISCOVER FINANCIA
FUNDS FLOW ANALY
CHANGES IN BALAN

Cash and cash equiva

Restricted cash
Other short-term inve
Investments securitie

Loan receivables:

Amounts due from as

Total Current Assets

Premises and equipm

Goodwill
Intangible assets, net
Other assets
TOTAL ASSETS

LIABILITIES AND EQ
Deposits:

Short-term borrowin
Long-term borrowing
Special dividend - Mo
Accrued expenses and

Stockholders'' Equity
Preferred stock

No. 13
Finance 400 Case E due February 18, 2013
Appendix Page 2 of 8

Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock

$4,805
$5,448
$5,471
$5,497
$2,938,657 $3,573,231 $3,435,318 $3,507,754
$3,046,956 $3,873,252 $3,126,488 $5,243,318
-$66,338 -$154,818
-$82,548
-$51,679
-$8,257
-$19,642
-$27,883 -$462,679

Common stock
Additional paid-in cap
Retained earnings
Accumulated other co
Treasury stock

Total stockholders' equity

TOTAL LIABILITIES AND STOCKHOLDERS'

$5,915,823 $8,435,547 $6,456,846 $8,242,211

######## ######## ######## ########

TOTAL LIABILITIES

Depreciation
Interest expense
Net income after tax
Dividends paid

$147,224
$70,108
-$22,562 -$234,581
$1,288,004 $1,251,284 $1,582,988 $1,484,552
$927,750 $1,276,185
$764,788 $2,226,708
-$116,956 -$101,034 -$845,431 -$109,573

DISCOVER FINANCIAL SERVICES INCOME STATEMENT

Interest income:
Credit card loans
Other loans
Investment securities
Other interest income
Total interest income
Interest expense:
Deposits
Short-term borrowings
Long-term borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after
provision for loan losses
Other income:
Securitization income
Discount and interchange revenue, net
Fee product revenue
Loan fee income
Transaction processing revenue
Merchant fees
Gain (loss) on investment
Antitrust litigation settlement
Other income
Total other income
Other expense:

2008

2009

2010

2011

$2,245,719 $2,836,767 $5,836,002 $5,654,088

$79,695
$168,517
$253,821
$618,806
$51,345
$68,694
$26,222
$59,365
$315,804
$72,102
$30,173
$12,880
$2,692,563 $3,146,080 $6,146,218 $6,345,139
$1,199,436
$343
$88,225
$1,288,004
$1,404,559
$1,595,615
-$191,056

$1,187,084
$2,538
$61,662
$1,251,284
$1,893,796
$2,362,405

$1,150,504
$986,776
$1
$133
$432,483
$497,643
$1,582,988 $1,484,552
$4,563,230 $4,860,587
$3,206,705 $1,013,350

-$468,609 $1,356,525 $3,847,237

$2,429,158 $1,879,304
$0
$0
$187,657
$222,835 $1,055,359 $1,083,847
$249,805
$295,066
$412,497
$428,193
$262,576
$247,267
$339,797
$338,147
$115,914
$125,201
$149,946
$179,989
$67,027
$44,248
$28,461
$16,184
-$50,294
-$3,826
$19,131
-$3,622
$863,634 $1,891,698
$0
$0
$138,981
$138,802
$89,808
$162,436
$4,264,458 $4,840,595 $2,094,999 $2,205,174

DISCOVER FINANCIA
Income Statement
Sales
Cost of revenue
Gross profit
Selling general and ad
Depreciation
Total expense
Operating income, EB
Interest expense
Taxable income
Income Tax
Net income after tax

FUNDS FLOW ANALY

CHANGES IN BALAN
Cash and cash equiva
Restricted cash
Other short-term inve
Investments securitie

Loan receivables:

No. 13
Finance 400 Case E due February 18, 2013
Appendix Page 3 of 8

Employee compensation and benefits

$845,392
Marketing and business development
$530,901
Information Processing & communications
$315,943
Professional fees
$349,484
Premises and equipment
$80,394
Other expenses
$293,683
Total other expenses
$2,415,797
Income before income tax expense
$1,657,605
Income tax expense
$594,692
Income from continuing operations
$1,062,913
Loss from discontinued operations, net of tax -$135,163
Net income
$927,750
Net income allocated to common stockholders $927,750
Basic earnings per share
$2
Diluted earnings per share
$2
Dividends paid per share
$0

$827,683
$802,649
$914,344
$406,020
$463,086
$537,486
$289,209
$258,111
$263,741
$321,329
$342,648
$415,275
$73,014
$70,274
$71,128
$333,833
$245,897
$339,193
$2,251,088 $2,182,665 $2,541,167
$2,120,898 $1,268,859 $3,511,244
$844,713
$504,071 $1,284,536
$1,276,185
$764,788 $2,226,708
$0
$0
$0
$1,276,185
$764,788 $2,226,708
$1,206,965
$667,938 $2,201,759
$2
$1
$4
$2
$1
$4
$0
$0
$0

Amounts due from as

Total Current Assets

Premises and e
Goodwill
Intangible assets, net
Other assets
TOTAL ASSETS

LIABILITIES AND EQ
Deposits

Short-term borrowin
Long-term borrowing
Special dividend - Mo
Accrued expenses and

Stockholders'' Equity
Preferred stock
Common stock
Additional paid-in cap
Retained earnings
Accumulated other co
Treasury stock
TOTAL LIABILITIES

No. 13
Finance 400 Case E due February 18, 2013
Appendix Page 4 of 8

VER FINANCIAL SERVICES ANALYSIS

S FLOW ANALYSIS
GES IN BALANCE SHEET ITEMS

nd cash equivalents
cted cash
short-term investments
ments securities
Available for sale
Held to maturity
Total investment securities
eceivables:
Loans held for sale
Loan portfolio:
Credit card
Other
Purchased credit-impaired loans
Total loan portfolio
Total loan receivables
Allowance for loan losses
Net loan receivables
nts due from asset securitization
Current Assets

DISCOVER FINANCIAL SERVICES ANALYSIS

2009-2008

2010-2009

$2,849,576
$643,311
$1,350,000

-$7,921,986
$720,447
-$975,000

$1,518,362
$2,288,991
$3,807,353

$2,357,098
-$2,317,000
$40,098

$0

$788,101

-$3,584,005
$1,992,478
$0
$0
-$1,591,527
-$383,314
-$1,974,841
-$541,549
$6,133,850

$24,926,692
-$503,464
$0
$48,048,312
$25,211,329
-$1,546,219
$23,665,110
-$1,692,051
$13,836,618

-$53,199
$0
-$7,683
$55,637
$6,128,605

-$38,571
$0
-$6,663
$972,597
$14,763,981

Interest-bearing deposit accounts

Non-interest bearing deposit accounts
Total deposits
term borrowings
erm borrowings
l dividend - Morgan Stanley
ed expenses and other liabilities
Total Liabilities

$3,576,360
-$13,869
$3,562,491
-$500,000
$692,718
$335,757
-$482,085
$3,608,881

$2,281,333
$39,038
$2,320,371
$0
$15,277,627
-$808,757
-$46,559
$16,742,682

holders'' Equity:
red stock

$1,158,066

-$1,158,066

ses and equipment, net

ible assets, net

assets
L ASSETS

LITIES AND EQUITY

SOURCES
2011-2010 Net Income
Add Depreciation
-$2,248,890 Add Int. Expense
-$77,938 Subtract Interest Revenue
-$375,000 Total from Operations
$1,105,252 FROM DECREASES IN ASSETS
$25,406 Cash
$1,130,658 Accounts Receivable
Inventories
-$73,921
FROM INCREASES IN LIABILITIES
$1,481,631 New A/P
$1,842,424 New O/P
$5,250,388 From New STD
$8,574,443 From New LTD
$8,500,522
$1,098,922 From NEC
$9,599,444
$0 SOURCES
$8,028,274 Net Income
Add Depreciation
$22,518 Add Int. Expense
$0 Total from Operations
-$955
-$50,868 FROM DECREASES IN ASSETS
$7,998,969 Cash
Accounts Receivable
Inventories
$5,154,048
$10,031
$5,164,079
$50,000
$581,450
$0
$468,075
$6,263,604

FROM INCREASES IN LIABILITIES

New A/P
New O/P
From New STD
From New LTD
From NEC

SOURCES
Net Income
$0 Add Depreciation

Funds Flow for 200

$39,181,315
$1,276,185
$70,108
$1,251,284
-$1,893,796
$703,781
$0
$541,549
$0
$3,064,327
$32,093,012
$0
$335,757

$2,778,646
Funds Flow for 201
$59,321,166
-$3,798,442
$22,562
$1,582,988
-$2,192,892
$7,921,986

$2,209,011
$34,413,383
$0
$15,277,627
$0

Funds Flow for 201

$44,352,177
-$2,633,879
$234,581

No. 13
Finance 400 Case E due February 18, 2013
Appendix Page 5 of 8

on stock
onal paid-in capital
ed earnings
mulated other comprehensive loss
ury stock
Total stockholders' equity

L LIABILITIES AND STOCKHOLDERS' EQUITY

VER FINANCIAL SERVICES ANALYSIS

me Statement

f revenue
profit
general and administrative expense
ciation
expense
ting income, EBIT
st expense
e income
e Tax
come after tax

$643
$634,574
$826,296
-$88,480
-$11,385
$2,519,724

$23
-$137,913
-$6,999,740
$72,270
-$8,241
-$1,978,701

$26
$72,436
$2,116,830
$30,869
-$434,796
$1,785,365

$6,128,605

$14,763,981

$7,998,969

Add Int. Expense

Total from Operations

$1,484,552
-$914,746

FROM DECREASES IN ASSETS

Cash
Accounts Receivable
Inventories

$2,248,890
$0

FROM INCREASES IN LIABILITIES

New A/P
New O/P
From New STD
From New LTD
From NEC

FUNDS FLOW STATEMENTS--SOURCES AND USES

2009
2010
2011
$7,985,675
$8,241,217
$8,550,313
$1,187,084
$1,150,504
$986,776
$6,798,591
$7,090,713
$7,563,537
$70,108
$2,251,088
$3,597,892
$1,251,284
$2,120,898
$844,713
$1,276,185

S FLOW ANALYSIS
GES IN BALANCE SHEET ITEMS
2009-2008
nd cash equivalents
$2,849,576
cted cash
$643,311
short-term investments
$1,350,000
ments securities
Available for sale
$1,518,362
Held to maturity
$2,288,991
Total investment securities
$3,807,353
eceivables:
Loans held for sale
$0
Loan portfolio:
Credit card
-$3,584,005
Other
$1,992,478
Purchased credit-impaired loans
$0

-$22,562
$2,182,665
$3,872,586
$1,582,988
$1,268,859
$504,071
$764,788

-$234,581
$2,541,167
$3,609,615
$1,484,552
$3,511,244
$1,284,536
$2,226,708

2010-2009
-$7,921,986
$720,447
-$975,000

2011-2010
-$2,248,890
-$77,938
-$375,000

$2,357,098
-$2,317,000
$40,098

$1,105,252
$25,406
$1,130,658

$788,101

-$73,921

$24,926,692
-$503,464
$0

$1,481,631
$1,842,424
$5,250,388

$2,627,086
$50,000
$581,450
$182,035

No. 13
Finance 400 Case E due February 18, 2013
Appendix Page 6 of 8

Total loan portfolio

Total loan receivables
Allowance for loan losses
Net loan receivables
nts due from asset securitization
Current Assets
equipment, net

ible assets, net

assets
L ASSETS

$0
-$1,591,527
-$383,314
-$1,974,841
-$541,549

$48,048,312
$25,211,329
-$1,546,219
$23,665,110
-$1,692,051

$8,574,443
$8,500,522
$1,098,922
$9,599,444
$0

-$53,199
$0
-$7,683
$55,637
$6,128,601

-$38,571
$0
-$6,663
$972,597
$14,763,981

$22,518
$0
-$170,155
-$50,868
$7,998,969

$3,576,360
-$13,869
$3,562,491
-$500,000
$692,718
$335,757
-$482,085
$3,608,881

$2,281,333
$39,038
$2,320,371
$0
$15,277,627
-$808,757
-$46,559
$16,742,682

$5,154,048
$10,031
$5,164,079
$50,000
$581,450
$0
$468,075
$6,263,604

$1,158,066
$643
$634,574
$826,296
-$88,480
-$11,385
$2,519,724
$6,128,605

-$1,158,066
$23
-$137,913
-$6,999,740
$72,270
-$8,241
-$1,978,701
$14,763,981

$0
$26
$72,436
$2,116,830
$30,869
-$434,796
$1,785,365
$7,998,969

LITIES AND EQUITY

Interest-bearing deposit accounts

Non-interest bearing deposit accounts
Total deposits
term borrowings
erm borrowings
l dividend - Morgan Stanley
ed expenses and other liabilities
Total Liabilities
holders'' Equity
red stock
on stock
onal paid-in capital
ed earnings
mulated other comprehensive loss
ury stock
Total stockholders' equity
L LIABILITIES AND STOCKHOLDERS' EQUITY

No. 13
Finance 400 Case E due February 18, 2013
Appendix Page 7 of 8

FUNDS FLOW STATEMENTS--SOURCES AND USES

Funds Flow for 2009
$39,181,315 USES
$1,276,185 To Pay Dividends
$70,108 To Pay Interest
$1,251,284
-$1,893,796 TO INCREASE ASSETS
$703,781 Cash
Accounts Receivable
Inventories
$0 Purchase Fixed Assets
$541,549 Incr Net Fixed Assets
$0 Add: Depreciation Exp
Total Purchase of Fixed Assets
$3,064,327
$32,093,012
$0
$335,757

TO REDUCE LIABILITIES
Accounts Payable
Other Payables
To Repay STD Principal
To Repay LTD Principal
$2,778,646 Purchase of Treasury stock
Funds Flow for 2010
$59,321,166 USES
-$3,798,442 To Pay Dividends
$22,562 To Pay Interest
$1,582,988
-$2,192,892 TO INCREASE ASSETS
Cash
Accounts Receivable
$7,921,986 Inventories
$1,692,051 Purchase Fixed Assets
$0 Incr Net Fixed Assets
Add: Depreciation Exp
Total Purchase of Fixed Assets
$2,209,011
$34,413,383 TO REDUCE LIABILITIES
$0 Accounts Payable
$15,277,627 Other Payables
To Repay STD Principal
$0 To Repay LTD Principal
Purchase of Treasury stock
Funds Flow for 2011
$44,352,177 USES
-$2,633,879 To Pay Dividends
$234,581 To Pay Interest

$37,034,517
$101,034
$1,251,284
$2,849,576
$0
$52,544
$53,199
$70,108
$3,025,427
$3,210,655
$28,530,521
$500,000
$404,211
$11,385
$15,562,991
$845,431
$1,582,988
$0
$0
$54,431
$38,571
$22,562
$115,564
$0
$3,064,327
$0
$9,946,440
$8,241
$45,124,099
$109,573
$1,484,552

No. 13
Finance 400 Case E due February 18, 2013
Appendix Page 8 of 8

$1,484,552
-$914,746 TO INCREASE ASSETS
Cash
Accounts Receivable
$2,248,890 Inventories
$0 Purchase Fixed Assets
$0 Incr Net Fixed Assets
Add: Depreciation Exp
Total Purchase of Fixed Assets
$2,627,086
######## TO REDUCE LIABILITIES
$50,000 Accounts Payable
$581,450 Other Payables
To Repay STD Principal
$182,035 To Repay LTD Principal
Purchase of Treasury stock

$0
$0
$0
$108,547
$22,518
$234,581
$365,646
$2,209,011
$34,413,383
$0
$6,107,138
$434,796