Refer to the attached Cash Flow Statements for Firm A and Firm B to answer the following questions. Provide all answers for the most recent year unless otherwise specified (the most recent year is on the left for Firm A and on the right for Firm B). Financial statement information other than that provided is not necessary to answer the questions. Basic Concepts: 1) If possible, determine the net change in Accounts Receivable, Inventory, and Accounts Payable over the three-year period presented for each company (you should report only one number for each three-year period). What other working capital accounts have significant changes over the three-year period? Briefly discuss what these changes might imply about working capital management for these firms. 2) What are the significant non-cash or non-operating adjustments these firms made to net income (to derive CFO) during the years presented? Use your judgement to determine what is significant. 3) Identify the major investing and financing transactions for each firm for the three years presented. For each firm, indicate what the primary source of cash flows has been in the years presented. Use your judgement to determine what is major and primary. Basic Analysis: 1) For each firm, compute and interpret the interest coverage ratio and cash flow adequacy ratio for the most recent year (as defined in the Class 14 slides). (Interest Expense for Firm A is 84,566 and for Firm B is 1,417.) 2) For each firm, compute and interpret the quality of earnings ratio for the most recent year (as defined in the Class 14 slides). Discuss any weaknesses of the ratio as a measure of the actual quality of earnings. Extended Analysis: 1) Indicate which, if any, of these firms are at risk of having inadequate cash flows to continue operations. Briefly discuss the factors you considered in your analysis. 2) For each of the firms, indicate which phase of the company's life cycle you believe it is in (introduction, growth, maturity, or decline). Briefly discuss the reasons for your conclusion. FIRM A CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended Decemher 31, 1999 1998 1997 Operating Activitles: Net loss.... Adjustments to reconcile net loss to net cash provided (used) in operating activities: Depreciation and amortization of fixed assets Amortization of deferred stock-based compensation . Equity in losses of equity-method investees.. Amortization of goodwill and other intangibles . Non-cash merger, acquisition, and investment related costs Non-cash revenue for advertising and promotional services Loss on sale of marketable securities. Non-cash interest expense. $ 719,968) S(124,546) $ (31,020) 36,806 30,618 76,769 214,694 8,072 (5,837) 8,688 29,171 9,421 2,386 2,905 42,599 1,561 3,442 1,354 271 23,970 Net cash used in operating activities before changes in operating assets and liabilities... Changes in operating assets and liabilities, net of effects from acquisitions: Inventories...... Prepaid expenses and other current assets Accounts payable.. Accrued expenses and other current liabilities. Accrued advertising... Deferred revenue. Interest payable (320,987) (41,433) (26,160) (172,069) (60,628) 330,166 65,121 42,382 262 24,878 (20,513) (16,758) 78,674 21,615 9,617 (8,400) (3,055) 30,172 5,274 2,856 (167 Net cash provided by changes in operating assets and liabilities, net of efects from acquisitions..... 230,112 (90,875) 72,468 26,847 Net cash provided (used) in operating activities . Investing Activities: Sales and maturities of marketable securities.. Purchases of marketable securities Purchases of fixed assets... Acquisitions and investments in businesses, net of cash acquired Net cash used in investing activities.. Financing Activities: Proceeds from issuance of capital stock and exercise of stock options Proceeds from long-term debt.. Repayment of long-term debt Financing costs..... 31,035 687 4,024,551 (4,290,173) (287,055) (369,607) (922,284) 332,084 (546,509) (28,333) (19,019) (261,777) 4,311 (122,385) (7,603) (125,677) 64,469 1,263,639 (188,886) (35,151) 1,104,071 489 14,366 325,987 (78,108) (7,783) 254,462 (35) 23,685 1,876 25,561 53,358 75,000 (47) (2,309) 126,002 Net cash provided by financing activities Effect of exchange rate changes Net increase in cash Cash at beginning of period Cash at end of period . Supplemental Cash Flow Information: Fixed assets acquired under capital leases Fixed assets acquired under tinancing agreements.. Stock issued in connection with business acquisitions. Equity securities of other companies received for non-cash revenue for advertising and promotional services..... Cash paid for interest, net of amounts capitalized.. 91,401 1,012 864 25,561 116,962 1,876 $ 25,850 5,608 774,409 $ 3,463 1,500 217,241 54,402 59,688 See accompanying notes to consolidated financial statements. 26,629 326 36 FIRM B CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2016 2017 2018 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD 16,175 S 19,934 $ 21,856 OPERATING ACTIVITIES: Net income 2,371 3,033 10,073 Adjustments to reconcile net income to net cash from operating activities: Depreciation of property and equipment and other amortization, including capitalized content costs 8,116 11,478 15,341 Stock-based compensation 2,975 4,215 5,418 Other operating expense, net Other expense (income), net 160 202 274 (20) (292) 219 Deferred income taxes (246) (29) 441 Changes in operating assets and liabilities: Inventories (1,426) (3,583) (1,314) Accounts receivable, net and other (3,436) (4,780) (4,615) Accounts payable 5,030 7,100 3,263 Accrued expenses and other 1,724 283 472 Uncarned revenue 738 1,151 30,723 1,955 Net cash provided by (used in) operating activities 17,203 18,365 INVESTING ACTIVITIES: (7,804) (11,955) Purchases of property and equipment Proceeds from property and equipment incentives (13,427) 1,067 1,897 2,104 Acquisitions, net of cash acquired, and other (116) (13,972) (2,186) Sales and maturities of marketable securities 4,577 9,677 8,240 Purchases of marketable securities (7,240) (9,516) (12,731) (27,084) (7,100) (12,369) Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Proceeds from long-term debt and other Repayments of long-tem debt and other 618 16,228 768 (327) (1,301) (668) Principal repayments of capital lease obligations (3,860) (4,799) (7,449) Principal repayments of finance lease obligations (147) (200) (337) Net cash provided by (used in) financing activities Foreign currency effect on cash, cash equivalents, and restricted cash Net increase (decrease) in cash, cash equivalents, and restricted cash (3,716) 9,928 (7,686) (212) 713 (351) 3,759 1,922 10,317 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD 19,934 S 21,856 S 32,173 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt 290 S 328 S 854 Cash paid for interest on capital and finance lease obligations 206 319 575 Cash paid for income taxes, net of refunds Property and equipment acquired under capital leases 412 957 1,184 5,704 9,637 10,615 Property and equipment acquired under build-to-suit leases 1,209 3,541 3,641 See accompanying notes to consolidated financial statements. Refer to the attached Cash Flow Statements for Firm A and Firm B to answer the following questions. Provide all answers for the most recent year unless otherwise specified (the most recent year is on the left for Firm A and on the right for Firm B). Financial statement information other than that provided is not necessary to answer the questions. Basic Concepts: 1) If possible, determine the net change in Accounts Receivable, Inventory, and Accounts Payable over the three-year period presented for each company (you should report only one number for each three-year period). What other working capital accounts have significant changes over the three-year period? Briefly discuss what these changes might imply about working capital management for these firms. 2) What are the significant non-cash or non-operating adjustments these firms made to net income (to derive CFO) during the years presented? Use your judgement to determine what is significant. 3) Identify the major investing and financing transactions for each firm for the three years presented. For each firm, indicate what the primary source of cash flows has been in the years presented. Use your judgement to determine what is major and primary. Basic Analysis: 1) For each firm, compute and interpret the interest coverage ratio and cash flow adequacy ratio for the most recent year (as defined in the Class 14 slides). (Interest Expense for Firm A is 84,566 and for Firm B is 1,417.) 2) For each firm, compute and interpret the quality of earnings ratio for the most recent year (as defined in the Class 14 slides). Discuss any weaknesses of the ratio as a measure of the actual quality of earnings. Extended Analysis: 1) Indicate which, if any, of these firms are at risk of having inadequate cash flows to continue operations. Briefly discuss the factors you considered in your analysis. 2) For each of the firms, indicate which phase of the company's life cycle you believe it is in (introduction, growth, maturity, or decline). Briefly discuss the reasons for your conclusion. FIRM A CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended Decemher 31, 1999 1998 1997 Operating Activitles: Net loss.... Adjustments to reconcile net loss to net cash provided (used) in operating activities: Depreciation and amortization of fixed assets Amortization of deferred stock-based compensation . Equity in losses of equity-method investees.. Amortization of goodwill and other intangibles . Non-cash merger, acquisition, and investment related costs Non-cash revenue for advertising and promotional services Loss on sale of marketable securities. Non-cash interest expense. $ 719,968) S(124,546) $ (31,020) 36,806 30,618 76,769 214,694 8,072 (5,837) 8,688 29,171 9,421 2,386 2,905 42,599 1,561 3,442 1,354 271 23,970 Net cash used in operating activities before changes in operating assets and liabilities... Changes in operating assets and liabilities, net of effects from acquisitions: Inventories...... Prepaid expenses and other current assets Accounts payable.. Accrued expenses and other current liabilities. Accrued advertising... Deferred revenue. Interest payable (320,987) (41,433) (26,160) (172,069) (60,628) 330,166 65,121 42,382 262 24,878 (20,513) (16,758) 78,674 21,615 9,617 (8,400) (3,055) 30,172 5,274 2,856 (167 Net cash provided by changes in operating assets and liabilities, net of efects from acquisitions..... 230,112 (90,875) 72,468 26,847 Net cash provided (used) in operating activities . Investing Activities: Sales and maturities of marketable securities.. Purchases of marketable securities Purchases of fixed assets... Acquisitions and investments in businesses, net of cash acquired Net cash used in investing activities.. Financing Activities: Proceeds from issuance of capital stock and exercise of stock options Proceeds from long-term debt.. Repayment of long-term debt Financing costs..... 31,035 687 4,024,551 (4,290,173) (287,055) (369,607) (922,284) 332,084 (546,509) (28,333) (19,019) (261,777) 4,311 (122,385) (7,603) (125,677) 64,469 1,263,639 (188,886) (35,151) 1,104,071 489 14,366 325,987 (78,108) (7,783) 254,462 (35) 23,685 1,876 25,561 53,358 75,000 (47) (2,309) 126,002 Net cash provided by financing activities Effect of exchange rate changes Net increase in cash Cash at beginning of period Cash at end of period . Supplemental Cash Flow Information: Fixed assets acquired under capital leases Fixed assets acquired under tinancing agreements.. Stock issued in connection with business acquisitions. Equity securities of other companies received for non-cash revenue for advertising and promotional services..... Cash paid for interest, net of amounts capitalized.. 91,401 1,012 864 25,561 116,962 1,876 $ 25,850 5,608 774,409 $ 3,463 1,500 217,241 54,402 59,688 See accompanying notes to consolidated financial statements. 26,629 326 36 FIRM B CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2016 2017 2018 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD 16,175 S 19,934 $ 21,856 OPERATING ACTIVITIES: Net income 2,371 3,033 10,073 Adjustments to reconcile net income to net cash from operating activities: Depreciation of property and equipment and other amortization, including capitalized content costs 8,116 11,478 15,341 Stock-based compensation 2,975 4,215 5,418 Other operating expense, net Other expense (income), net 160 202 274 (20) (292) 219 Deferred income taxes (246) (29) 441 Changes in operating assets and liabilities: Inventories (1,426) (3,583) (1,314) Accounts receivable, net and other (3,436) (4,780) (4,615) Accounts payable 5,030 7,100 3,263 Accrued expenses and other 1,724 283 472 Uncarned revenue 738 1,151 30,723 1,955 Net cash provided by (used in) operating activities 17,203 18,365 INVESTING ACTIVITIES: (7,804) (11,955) Purchases of property and equipment Proceeds from property and equipment incentives (13,427) 1,067 1,897 2,104 Acquisitions, net of cash acquired, and other (116) (13,972) (2,186) Sales and maturities of marketable securities 4,577 9,677 8,240 Purchases of marketable securities (7,240) (9,516) (12,731) (27,084) (7,100) (12,369) Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Proceeds from long-term debt and other Repayments of long-tem debt and other 618 16,228 768 (327) (1,301) (668) Principal repayments of capital lease obligations (3,860) (4,799) (7,449) Principal repayments of finance lease obligations (147) (200) (337) Net cash provided by (used in) financing activities Foreign currency effect on cash, cash equivalents, and restricted cash Net increase (decrease) in cash, cash equivalents, and restricted cash (3,716) 9,928 (7,686) (212) 713 (351) 3,759 1,922 10,317 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD 19,934 S 21,856 S 32,173 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt 290 S 328 S 854 Cash paid for interest on capital and finance lease obligations 206 319 575 Cash paid for income taxes, net of refunds Property and equipment acquired under capital leases 412 957 1,184 5,704 9,637 10,615 Property and equipment acquired under build-to-suit leases 1,209 3,541 3,641 See accompanying notes to consolidated financial statements. Refer to the attached Cash Flow Statements for Firm A and Firm B to answer the following questions. Provide all answers for the most recent year unless otherwise specified (the most recent year is on the left for Firm A and on the right for Firm B). Financial statement information other than that provided is not necessary to answer the questions. Basic Concepts: 1) If possible, determine the net change in Accounts Receivable, Inventory, and Accounts Payable over the three-year period presented for each company (you should report only one number for each three-year period). What other working capital accounts have significant changes over the three-year period? Briefly discuss what these changes might imply about working capital management for these firms. 2) What are the significant non-cash or non-operating adjustments these firms made to net income (to derive CFO) during the years presented? Use your judgement to determine what is significant. 3) Identify the major investing and financing transactions for each firm for the three years presented. For each firm, indicate what the primary source of cash flows has been in the years presented. Use your judgement to determine what is major and primary. Basic Analysis: 1) For each firm, compute and interpret the interest coverage ratio and cash flow adequacy ratio for the most recent year (as defined in the Class 14 slides). (Interest Expense for Firm A is 84,566 and for Firm B is 1,417.) 2) For each firm, compute and interpret the quality of earnings ratio for the most recent year (as defined in the Class 14 slides). Discuss any weaknesses of the ratio as a measure of the actual quality of earnings. Extended Analysis: 1) Indicate which, if any, of these firms are at risk of having inadequate cash flows to continue operations. Briefly discuss the factors you considered in your analysis. 2) For each of the firms, indicate which phase of the company's life cycle you believe it is in (introduction, growth, maturity, or decline). Briefly discuss the reasons for your conclusion. FIRM A CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended Decemher 31, 1999 1998 1997 Operating Activitles: Net loss.... Adjustments to reconcile net loss to net cash provided (used) in operating activities: Depreciation and amortization of fixed assets Amortization of deferred stock-based compensation . Equity in losses of equity-method investees.. Amortization of goodwill and other intangibles . Non-cash merger, acquisition, and investment related costs Non-cash revenue for advertising and promotional services Loss on sale of marketable securities. Non-cash interest expense. $ 719,968) S(124,546) $ (31,020) 36,806 30,618 76,769 214,694 8,072 (5,837) 8,688 29,171 9,421 2,386 2,905 42,599 1,561 3,442 1,354 271 23,970 Net cash used in operating activities before changes in operating assets and liabilities... Changes in operating assets and liabilities, net of effects from acquisitions: Inventories...... Prepaid expenses and other current assets Accounts payable.. Accrued expenses and other current liabilities. Accrued advertising... Deferred revenue. Interest payable (320,987) (41,433) (26,160) (172,069) (60,628) 330,166 65,121 42,382 262 24,878 (20,513) (16,758) 78,674 21,615 9,617 (8,400) (3,055) 30,172 5,274 2,856 (167 Net cash provided by changes in operating assets and liabilities, net of efects from acquisitions..... 230,112 (90,875) 72,468 26,847 Net cash provided (used) in operating activities . Investing Activities: Sales and maturities of marketable securities.. Purchases of marketable securities Purchases of fixed assets... Acquisitions and investments in businesses, net of cash acquired Net cash used in investing activities.. Financing Activities: Proceeds from issuance of capital stock and exercise of stock options Proceeds from long-term debt.. Repayment of long-term debt Financing costs..... 31,035 687 4,024,551 (4,290,173) (287,055) (369,607) (922,284) 332,084 (546,509) (28,333) (19,019) (261,777) 4,311 (122,385) (7,603) (125,677) 64,469 1,263,639 (188,886) (35,151) 1,104,071 489 14,366 325,987 (78,108) (7,783) 254,462 (35) 23,685 1,876 25,561 53,358 75,000 (47) (2,309) 126,002 Net cash provided by financing activities Effect of exchange rate changes Net increase in cash Cash at beginning of period Cash at end of period . Supplemental Cash Flow Information: Fixed assets acquired under capital leases Fixed assets acquired under tinancing agreements.. Stock issued in connection with business acquisitions. Equity securities of other companies received for non-cash revenue for advertising and promotional services..... Cash paid for interest, net of amounts capitalized.. 91,401 1,012 864 25,561 116,962 1,876 $ 25,850 5,608 774,409 $ 3,463 1,500 217,241 54,402 59,688 See accompanying notes to consolidated financial statements. 26,629 326 36 FIRM B CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2016 2017 2018 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD 16,175 S 19,934 $ 21,856 OPERATING ACTIVITIES: Net income 2,371 3,033 10,073 Adjustments to reconcile net income to net cash from operating activities: Depreciation of property and equipment and other amortization, including capitalized content costs 8,116 11,478 15,341 Stock-based compensation 2,975 4,215 5,418 Other operating expense, net Other expense (income), net 160 202 274 (20) (292) 219 Deferred income taxes (246) (29) 441 Changes in operating assets and liabilities: Inventories (1,426) (3,583) (1,314) Accounts receivable, net and other (3,436) (4,780) (4,615) Accounts payable 5,030 7,100 3,263 Accrued expenses and other 1,724 283 472 Uncarned revenue 738 1,151 30,723 1,955 Net cash provided by (used in) operating activities 17,203 18,365 INVESTING ACTIVITIES: (7,804) (11,955) Purchases of property and equipment Proceeds from property and equipment incentives (13,427) 1,067 1,897 2,104 Acquisitions, net of cash acquired, and other (116) (13,972) (2,186) Sales and maturities of marketable securities 4,577 9,677 8,240 Purchases of marketable securities (7,240) (9,516) (12,731) (27,084) (7,100) (12,369) Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Proceeds from long-term debt and other Repayments of long-tem debt and other 618 16,228 768 (327) (1,301) (668) Principal repayments of capital lease obligations (3,860) (4,799) (7,449) Principal repayments of finance lease obligations (147) (200) (337) Net cash provided by (used in) financing activities Foreign currency effect on cash, cash equivalents, and restricted cash Net increase (decrease) in cash, cash equivalents, and restricted cash (3,716) 9,928 (7,686) (212) 713 (351) 3,759 1,922 10,317 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD 19,934 S 21,856 S 32,173 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt 290 S 328 S 854 Cash paid for interest on capital and finance lease obligations 206 319 575 Cash paid for income taxes, net of refunds Property and equipment acquired under capital leases 412 957 1,184 5,704 9,637 10,615 Property and equipment acquired under build-to-suit leases 1,209 3,541 3,641 See accompanying notes to consolidated financial statements. Refer to the attached Cash Flow Statements for Firm A and Firm B to answer the following questions. Provide all answers for the most recent year unless otherwise specified (the most recent year is on the left for Firm A and on the right for Firm B). Financial statement information other than that provided is not necessary to answer the questions. Basic Concepts: 1) If possible, determine the net change in Accounts Receivable, Inventory, and Accounts Payable over the three-year period presented for each company (you should report only one number for each three-year period). What other working capital accounts have significant changes over the three-year period? Briefly discuss what these changes might imply about working capital management for these firms. 2) What are the significant non-cash or non-operating adjustments these firms made to net income (to derive CFO) during the years presented? Use your judgement to determine what is significant. 3) Identify the major investing and financing transactions for each firm for the three years presented. For each firm, indicate what the primary source of cash flows has been in the years presented. Use your judgement to determine what is major and primary. Basic Analysis: 1) For each firm, compute and interpret the interest coverage ratio and cash flow adequacy ratio for the most recent year (as defined in the Class 14 slides). (Interest Expense for Firm A is 84,566 and for Firm B is 1,417.) 2) For each firm, compute and interpret the quality of earnings ratio for the most recent year (as defined in the Class 14 slides). Discuss any weaknesses of the ratio as a measure of the actual quality of earnings. Extended Analysis: 1) Indicate which, if any, of these firms are at risk of having inadequate cash flows to continue operations. Briefly discuss the factors you considered in your analysis. 2) For each of the firms, indicate which phase of the company's life cycle you believe it is in (introduction, growth, maturity, or decline). Briefly discuss the reasons for your conclusion. FIRM A CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended Decemher 31, 1999 1998 1997 Operating Activitles: Net loss.... Adjustments to reconcile net loss to net cash provided (used) in operating activities: Depreciation and amortization of fixed assets Amortization of deferred stock-based compensation . Equity in losses of equity-method investees.. Amortization of goodwill and other intangibles . Non-cash merger, acquisition, and investment related costs Non-cash revenue for advertising and promotional services Loss on sale of marketable securities. Non-cash interest expense. $ 719,968) S(124,546) $ (31,020) 36,806 30,618 76,769 214,694 8,072 (5,837) 8,688 29,171 9,421 2,386 2,905 42,599 1,561 3,442 1,354 271 23,970 Net cash used in operating activities before changes in operating assets and liabilities... Changes in operating assets and liabilities, net of effects from acquisitions: Inventories...... Prepaid expenses and other current assets Accounts payable.. Accrued expenses and other current liabilities. Accrued advertising... Deferred revenue. Interest payable (320,987) (41,433) (26,160) (172,069) (60,628) 330,166 65,121 42,382 262 24,878 (20,513) (16,758) 78,674 21,615 9,617 (8,400) (3,055) 30,172 5,274 2,856 (167 Net cash provided by changes in operating assets and liabilities, net of efects from acquisitions..... 230,112 (90,875) 72,468 26,847 Net cash provided (used) in operating activities . Investing Activities: Sales and maturities of marketable securities.. Purchases of marketable securities Purchases of fixed assets... Acquisitions and investments in businesses, net of cash acquired Net cash used in investing activities.. Financing Activities: Proceeds from issuance of capital stock and exercise of stock options Proceeds from long-term debt.. Repayment of long-term debt Financing costs..... 31,035 687 4,024,551 (4,290,173) (287,055) (369,607) (922,284) 332,084 (546,509) (28,333) (19,019) (261,777) 4,311 (122,385) (7,603) (125,677) 64,469 1,263,639 (188,886) (35,151) 1,104,071 489 14,366 325,987 (78,108) (7,783) 254,462 (35) 23,685 1,876 25,561 53,358 75,000 (47) (2,309) 126,002 Net cash provided by financing activities Effect of exchange rate changes Net increase in cash Cash at beginning of period Cash at end of period . Supplemental Cash Flow Information: Fixed assets acquired under capital leases Fixed assets acquired under tinancing agreements.. Stock issued in connection with business acquisitions. Equity securities of other companies received for non-cash revenue for advertising and promotional services..... Cash paid for interest, net of amounts capitalized.. 91,401 1,012 864 25,561 116,962 1,876 $ 25,850 5,608 774,409 $ 3,463 1,500 217,241 54,402 59,688 See accompanying notes to consolidated financial statements. 26,629 326 36 FIRM B CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2016 2017 2018 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD 16,175 S 19,934 $ 21,856 OPERATING ACTIVITIES: Net income 2,371 3,033 10,073 Adjustments to reconcile net income to net cash from operating activities: Depreciation of property and equipment and other amortization, including capitalized content costs 8,116 11,478 15,341 Stock-based compensation 2,975 4,215 5,418 Other operating expense, net Other expense (income), net 160 202 274 (20) (292) 219 Deferred income taxes (246) (29) 441 Changes in operating assets and liabilities: Inventories (1,426) (3,583) (1,314) Accounts receivable, net and other (3,436) (4,780) (4,615) Accounts payable 5,030 7,100 3,263 Accrued expenses and other 1,724 283 472 Uncarned revenue 738 1,151 30,723 1,955 Net cash provided by (used in) operating activities 17,203 18,365 INVESTING ACTIVITIES: (7,804) (11,955) Purchases of property and equipment Proceeds from property and equipment incentives (13,427) 1,067 1,897 2,104 Acquisitions, net of cash acquired, and other (116) (13,972) (2,186) Sales and maturities of marketable securities 4,577 9,677 8,240 Purchases of marketable securities (7,240) (9,516) (12,731) (27,084) (7,100) (12,369) Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Proceeds from long-term debt and other Repayments of long-tem debt and other 618 16,228 768 (327) (1,301) (668) Principal repayments of capital lease obligations (3,860) (4,799) (7,449) Principal repayments of finance lease obligations (147) (200) (337) Net cash provided by (used in) financing activities Foreign currency effect on cash, cash equivalents, and restricted cash Net increase (decrease) in cash, cash equivalents, and restricted cash (3,716) 9,928 (7,686) (212) 713 (351) 3,759 1,922 10,317 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD 19,934 S 21,856 S 32,173 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt 290 S 328 S 854 Cash paid for interest on capital and finance lease obligations 206 319 575 Cash paid for income taxes, net of refunds Property and equipment acquired under capital leases 412 957 1,184 5,704 9,637 10,615 Property and equipment acquired under build-to-suit leases 1,209 3,541 3,641 See accompanying notes to consolidated financial statements.