Discover 2009 Annual Report Download - page 158

Discover Financial Services
(Parent Company Only)
Condensed 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 (used for) operating activities:
Non-cash charges included in net income:
Equity in undistributed earnings of subsidiaries .................................................................................... (609,780) (531,720) —
Stock-based compensation expense.................................................................................................... 44,249 92,558 35,710
Deferred income taxes...................................................................................................................... (31,699) 1,390 (16,011)
Depreciation and amortization .......................................................................................................... 85 88 45
Pension curtailment.......................................................................................................................... — (38,891) —
Changes in assets and liabilities:
(Increase) decrease in other assets...................................................................................................... 1,864 (854,687) (3,862)
(Decrease) increase in other liabilities and accrued expenses.................................................................. 65,287 110,105 (114,548)
Net cash provided by (used for) operating activities ........................................................................... 746,191 (293,407) 489,964
Cash flows from investing activities
Net proceeds from (payments for):
(Increase) decrease in investment in subsidiaries ...................................................................................... (1,233,958) — 1,241,781
(Increase) decrease in loans to subsidiaries ............................................................................................. (463,591) 465,776 (465,776)
Maturities of investment securities .......................................................................................................... 4,032 — —
Increase in restricted cash – special dividend escrow ................................................................................ (643,311) — —
Decrease in loans to Morgan Stanley ..................................................................................................... — — 118,160
Decrease in other loans ....................................................................................................................... — — 1,460,066
Purchases of premises and equipment .................................................................................................... — — 233
Net cash provided by (used for) investing activities ............................................................................ (2,336,828) 465,776 2,354,464
Cash flows from financing activities
Net decrease in short-term borrowings ......................................................................................................... — — (1,824,603)
Proceeds from issuance of long-term borrowings and bank notes ...................................................................... 400,000 — 799,204
Maturity of long-term borrowings................................................................................................................. — — (438,579)
Proceeds from issuance of preferred stock and warrants .................................................................................. 1,224,558 — —
Proceeds from issuance of common stock ...................................................................................................... 533,822 — —
Purchases of treasury stock ......................................................................................................................... (11,385) (6,838) (1,419)
Net (decrease) increase in deposits .............................................................................................................. (6,319) 7,353 (302)
Dividends paid ......................................................................................................................................... (101,034) (116,956) (29,146)
Capital contributions from Morgan Stanley.................................................................................................... — — 31,041
Dividends paid to Morgan Stanley ............................................................................................................... — — (850,000)
Net cash provided by (used for) financing activities ........................................................................... 2,039,642 (116,441) (2,313,804)
Increase in cash and cash equivalents........................................................................................................... 449,005 55,928 530,624
Cash and cash equivalents, at beginning of year............................................................................................ 586,601 530,673 49
Cash and cash equivalents, at end of year .................................................................................................... $ 1,035,606 $ 586,601 $ 530,673
Supplemental Disclosures:
Cash paid during the year for:
Interest expense.................................................................................................................................. $ 36,056 $ 45,668 $ 87,639
Income taxes, net of income tax refunds ................................................................................................. $ 438,098 $ 111,041 $ 27,923
Non-cash transactions
Special dividend – Morgan Stanley ....................................................................................................... $ (335,757) $(473,000) $ —
Capital contributions from Morgan Stanley ............................................................................................. $ — $ — $ 103,959
-146-