Refer back to the information given for E12-10, plus the following summarized income statement for Pizza International, Inc. (in thousands):

Required:

1. Based on this information, compute cash flow from operating activities using the direct method. Assume Prepaid Expenses and Accrued Liabilities relate to office expenses.

2. What was the primary reason that Pizza International was able to report large positive cash flow from operations despite nearly having a net loss?

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$143,551 Revenues Cost of Sales 45,500 Gross Profit 98,051 Salary and Wages Expense 56,835 Depreciation Office Expenses 33,305 7,781 Net Income before Income Tax Expense Income Tax Expense 130 30 Net Income 100