Discover 2009 Annual Report Download - page 103

Discover Financial Services
Consolidated Statements of Cash Flows
For the Years Ended November 30,
2009 2008 2007
(dollars in thousands)
Cash flows from operating activities
Net income..................................................................................................................................... $ 1,276,185 $ 927,750 $ 588,630
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on sales of mortgages and installment loans ............................................................................ — — (3,105)
Net principal disbursed on loans originated for sale .......................................................................... — — (99,158)
Proceeds from sales of loans originated for sale ................................................................................ — — 106,010
Loss on sale of Goldfish business .................................................................................................... — 165,694 —
Impairment of Goldfish business ..................................................................................................... — — 391,119
Loss on investment securities........................................................................................................... 9,239 50,294 11,409
Loss on equipment........................................................................................................................ 6,436 — —
Stock-based compensation expense ................................................................................................ 44,249 92,558 35,710
Deferred income taxes .................................................................................................................. (61,995) (262,354) (218,215)
Pension curtailment....................................................................................................................... — (38,891) —
Depreciation and amortization on premises and equipment ................................................................ 97,930 107,151 122,934
Amortization of deferred revenues .................................................................................................. (133,384) (84,174) (22,484)
Other depreciation and amortization............................................................................................... 105,562 124,247 134,197
Provision for loan losses ................................................................................................................ 2,362,405 1,615,625 950,165
Changes in assets and liabilities:
(Increase) decrease in amounts due from asset securitization............................................................ 541,549 805,292 79,124
(Increase) decrease in other assets ............................................................................................... (104,724) (171,801) (129,266)
Increase (decrease) in accrued expenses and other liabilities............................................................ (545,560) 1,172,768 90,955
Net cash provided by operating activities ............................................................................................... 3,597,892 4,504,159 2,038,025
Cash flows from investing activities
Proceeds from the sale of Goldfish business ...................................................................................... — 69,529 —
Payments for business and other acquisitions, net of cash acquired ...................................................... — (160,278) (5,000)
Maturities of other short-term investments......................................................................................... 919,700 — —
Purchases of other short-term investments......................................................................................... (2,269,700) — —
Maturities and sales of available-for-sale investment securities ............................................................. 423,014 — —
Purchases of available-for-sale investment securities........................................................................... (683,980) (85,740) (120,085)
Maturities of held-to-maturity investment securities ............................................................................. 8,286 37,200 10,556
Purchases of held-to-maturity investment securities............................................................................. (1,269) (33,581) (32,990)
Proceeds from securitization and sale of loans held for investment........................................................ 3,542,850 5,562,195 8,434,488
Net principal disbursed on loans held for investment.......................................................................... (7,403,826) (11,426,755) (9,763,849)
(Increase) in restricted cash – special dividend escrow........................................................................ (643,311) — —
Proceeds from sale of equipment .................................................................................................... 1,249 — —
Purchases of premises and equipment.............................................................................................. (53,793) (93,532) (118,265)
Net cash used for investing activities ...................................................................................................... (6,160,780) (6,130,962) (1,595,145)
Cash flows from financing activities
Proceeds from the issuance of preferred stock and warrant ................................................................. 1,224,558 — —
Proceeds from the issuance of common stock .................................................................................... 533,822 — —
Net (decrease) increase in short-term borrowings .............................................................................. (500,000) (259,314) (3,895,600)
Proceeds from issuance of long-term borrowings and bank notes ......................................................... 1,098,194 — 2,102,951
Repayment of long-term borrowings and bank notes.......................................................................... (404,211) (397,606) (1,486,271)
Purchases of treasury stock ............................................................................................................ (11,385) (6,838) (1,419)
Net increase (decrease) in deposits ................................................................................................. 3,572,520 3,816,157 11,345,340
Capital contributions from Morgan Stanley....................................................................................... — — 273,138
Dividends paid to Morgan Stanley .................................................................................................. — — (850,000)
Dividends paid on common and preferred stock................................................................................ (101,034) (116,956) (29,146)
Net cash provided by financing activities................................................................................................ 5,412,464 3,035,443 7,458,993
Effect of exchange rate changes on cash and cash equivalents................................................................... — (24,592) 10,865
Net increase in cash and cash equivalents .............................................................................................. 2,849,576 1,384,048 7,912,738
Cash and cash equivalents, at beginning of year ..................................................................................... 10,171,143 8,787,095 874,357
Cash and cash equivalents, at end of year.............................................................................................. $13,020,719 $ 10,171,143 $ 8,787,095
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest expense............................................................................................................................... $ 1,266,427 $ 1,305,554 $ 1,233,366
Income taxes, net of income tax refunds .............................................................................................. $ 913,988 $ 670,763 $ 531,253
Non-cash transactions:
Acquisition of certificated beneficial interests in DCENT and DCMT, net of maturities.................................. $ 3,561,139 $ 750,000 $ 315,000
Special dividend – Morgan Stanley .................................................................................................... $ (335,757) $ (473,000) $ —
Capital contributions to Morgan Stanley.............................................................................................. $ — $ — $ (94,309)
See Notes to the Consolidated Financial Statements.
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