***please answer with the statement of cash flows for the following. will make sure to thumbs up***

In early 2010. Honza Muska, Chief Financial Officer of Aussie Pies, Inc., looked over the term loan agreement he had just signed with Sona Brabcova, head of commercial lending at Bank of America's regional headquarters in Seattle, Washington. It had been a tough negotiation, but Brabcova had reluctantly increased the credit limit from $2 million to $3 million, provided Aussie Pies was willing to agree to additional loan covenants, as well as additional collateral to secure the loan. Brabcova noted that the company's sales had increased substantially during the last few years, but that the company reported declining profits and higher debt. The company had made sales growth and increased brand awareness a top priority. Muska wondered whether the new loan agreement would permit the company to begin construction of five additional stores in 2010. Company Background In 2005, Anna Amphlett and Andrew Ferris established their first Aussic Pies retail outlet ar Pike Sereet Market in Seatte, Washington. Aussie Pies produced, marketed, and distributed "Aussie" meat pies. The business began with a single store, but by 2009 there were 10 stores, and an agreement with Costco to supply fresh Aussie Pies at their locations throughout North America. A meat pie is a hand-sized pot pie made with pastry and filled with minced (ground) beef and gravy, which is consumed as a takeaway food snack in Australia (sec Exhibit 1). Amphlett and Ferris discovered meat pies at an Australian Rules football game while on a vacation in Australia. They found that the average Australian consumed 45 meat pies per year, usually with several bottles of beer. The meat pic is about four inches in diameter and is traditionally eaten in the hands like a sandwich, with ketchup. The pic has a short crust bottom and a flaky pastry top. Amphlett and Ferris selected Pike Street Market because it was a popular destination with young tourists, particularly international visitors. Marketers often used Seartle as a test city for new foods because of Seattle's well-educated, higher income population, which consumed more ethic cuisine and exotic foods than many other major U.S. cities. Amphlett and Ferris both had extensive retailing experience. Amphlett was employed at Starbucks Coffee Corporation, headquartered in Seatule, where she gained valuable retailing experience as a regional manager. She had been involved in many different aspects of Starbucks' business induding personnel, supply chain, production, and business development. Ferris, an accountant by training, worked as an assistant controller at the Seattle headquarters of Tully's Coffee Corporation, where he had became familiar with the financial side of retailing, as well as customer service. Amphlett and Ferris decided to focus on upper-middle income customers between 30 and 50 years of age. Because these customers were weight- and diet-conscious, they decided to manufacture the pies with high-quality, low-far beef that had been range rather than lot fed. They also ensured shat the beef had been raised on ranches using no hormones or insecticides, and thcy also developed a marketing and sales campaign emphasizing the use of high-quality ingredients. Using beef raised under these Gnaeme Rankine for the parpose of dasroom discusion only and not to indicute cither fffrtive or in ffortier manngemeut. This document is authorized for use only by Suzanne Arndt in 2022. conditions would be more expensive, but they felt that this would be mote appealing to young, healthconscious customens who were willing to pay a pecmium for moperioe quility snack foods: They decided to muke the pies fresh at the shore rather than serve curtomen reheated products. This would occasionally mean disposing of unold pies, but Amphlet and Ferria concluded that reheating meat pies caused the sauce filling to permeate the pie base and malve the pie sogby, In addition, they encouraged customers to call in theit orders so that the meat pies could be made fresh on demand, further emphasizing the freshness appeal. Strict hygiene and sanitary conditions for making and serving the meat pies were put in place. Amphlett and Ferris came up with a design fot the stare in which the meat puis would be made at the back of the store with a glass wall pand separating the front section so that customers could see the spoclessly ckan facilities in which the pies were made. They felt that this wothl enhance the custumers' perception that Ausic Picr was a premium product using high-qualiry ingredients and produced under impeccably an arary conditions. The company alwo emphasizod ountanding castomer service - the store's sales staff was expected to greet regular cuitomers by name and to know their pie pneferences. Even their delivery truck drivers received exiensive customer service training. Based on marlict recanch, the price was set at $3.25 per pie. Ausie Pies aho offerod a moncy back guarantee-any customer could return all purchases with no questions asked, and would be offered two frec movic theatre paser as well. In 2006, the company's firs year of operatioss, sales reached 56 million, far aloove their initial expectarions of about $1 million. Duning 2006, they expanded the meres capaciry by acquiring a vacant space adjacent to the Pike Phoce Market store. In 2007 , the company expanded beyond the standard meat pie by introducing specialty pies such as steak and kidncy pies, meat and sun-dried tomato pies, chicken and potato pies, and cven Barramundi pies. 'These prodacts were sold in smaller quantities and required custom production techniques. Amphlett and Ferris also experimenoed with baking and distributing fresh breads, including wine hread. Barramundi bread, and Bodalla cheese bread. Ferris's experiments in making wine bread had been quite sucsesful, so they negoriatsd an agreement with the makers of the popular Australian wine, Yellow Tail, for co-branding the new wine bread. In 2007, they added an additional stone in suburban Bellevar. Washingtos, about 10 miles from the downtown Seatte store. In 2007, they also negotiated an agreemene to supply Contwo Wholecale Corporationi stores with freh pies. To meet increasing demand for meat pies, the company hited additional chefs, baking assistants, and sales staff. Delivery wo Costco sares made it necescary to acquire several trucks with oa-bourd heating equipment for the fresh-baked pies. Ferris made an appearance on The Tonight Show with Jay Leno after news reports that an Aussic Piec crac had hit Searte. Together with Amphlettis appearance on the Oprab Winficy. Slivele the free publiciry served to boost ales and brand awasenos. The flugrhip store even became a cult location, much as Starbuck' fint stose had hecome. In 2008 , Aassie Fies added two new stores, inchuling one done to Fioneer Square, a popular tourist destination, and another store in upscale lscaquah, Washington. During the same year, the camspany increased the price to $3.50 per pie to defray the cost of producing apecialry pies such as the steak and kidncy, and chicken and porato pies, The higher price did noe deter customers. In 2008, sales increaved to 58.28 million, up from 96.9 millaon in 2007 . In 2009, the company added sax more storex, induding one in Redimond, Waatington, close to Microsoft Comporation's headquartens (see Fxhibit 2 for information about the counpany's stures). It proved a fortunate decision because Aussie Pies became a sexple Innch item for many Microsofr employ- "A barramundi is a popular fah with Ausralian consumacn. It is unully pale grey geen with a coppery shimaner, and can grow to a masumumi length of 2m (6ff 7 in), welighing up to 60kg(130lb) specimiens wcithing 56ky 2 Bodalls cheese, a popoular cherie with Aatralian coinumen, w mule in Bedallh, Ausralin 2 TB00s9 ces. Sales rocecdod $13 million in 2000, despite a price increas to $3.75 per pie. Faco Ball Gates became a sogular caitomer. After the Sremer Timer scported that Gates favocise pie ras che Bartamandi pie, sales of specialty pies rocketed. To enhance ito service offering, Aussic Ries provided crodit to wholeale customers such as Contco. Safeway, By's Wholesale Club, and Sumi Cieb, on payment acrms of 20, 10, net 30. 'The coenpuay's wholesale customers, who accounted for approuimutely 60% of 2009 sales revenoes, generally took advantage of the credit available, while actail customers paid in cahh. As a rulc, wholealers gencrally scheduled their purchases in advance, coabling Ausie Pies to manafacture the pies on a just-in-time bavi.. Retail customers, however, gencrally cupected Ausuic Pies to have all of ies pies contianoualy on band and frech. Sometimes the coenpony had to throw away pics that had ar in doplay counters for too long to be considered fresh. To bwost sales to its wholewale cuatomen, the company became lesu strin: gent in granting them credit, and in moaitoring and collecting outuranding receivables, while continuing to parchase only the highest qualiry ingredients and supplics from rrpueable merchandisen. Sugpliens rypically offered Aasaie Pies credit termst of 24510, net 30 on its pushuses. Financial Situation To finance its rapid growth. Aassec Phes had relicd heavily on short-term loans from Bunk of America. which had recently increased the company's term loun to $3 maltian (Fahikit 3 provides bulance sheor and income ratement data foe the yean 2006-2009). The term loan wat funded (ee repaid) en june 30 of each yeat, and bote an iatenest rate of 6 Wh per yeat or about 100 basis points above the peime intereat rate. If Ausse Pies utilived at lear the maimum amount of the term loan, which Marla belioved would be necesary in 2010, the short-term interent odigation would be around 3146000 . The shart-term loan was secured by a lien on all of Aussie Phes acoounts roccivable and iaventories, while the loanis covenants specified minimum levels of working capital and net worth that had to be muincaincd. Another importaat wounce of financing fot Aussie Pies' working capital nocds orer the lust fow years had been the practice of aretching payatlen, ie. ddaying payments of accenanta payable to the company's supplices. Most suppliers offered terms of 20 10, net 30 , bat hassic Fries had itretched its payable to the point shat several of its uppliers had callod Andrew Ferris te complain abous sbe dowdown. Itetra Divisova, the CEO of Nurura Flour, Inc., called to ay ahe was aloo a senall business oweer who could sot afford to finance Aussie The' buaines. The company's outuanding long-term dcbt of $750.000, financed by Matt Feria, a belionuint McDonalds frandiisee and Andrew Fetrixis grandfather, was due and payable on fune 30, 2014. In 2009. Matt Fetris had provided 5250,000 in additional loans and indicaned that he woold be uswilling to increase his commitment to the busincsu, but that the inccreit rate of 8ll per ycar would nomain in cffect on all long-term debe. In 2009, Amphlet and Ferris invostod 5150.000 in additional oguiry in the business, but they were unable to inver mosc in the near term, and they mere also srlacrant to dilute their holdings by secking outide equity investon. The company's shost term bonus sheme paid incrative comprnation and was bosed an rarning bcfore interest, taxe, depteciation, and amortization (EBITDA). Under the plan, the bonds pool was 10% of EBITD A if EBITD A csewded 51 million, and acto otherwinc. To casuse that nep manapoment did not view cach outhys on capiral invesument as a free pood. Muska had rocendy recommended to the company's boued of directors that the bonus plan in the furute ahould be tuned on frre cach flow, which be defined as FBITDA less capital cypcnditues (CapFa), ar even cash flow from eperations lesu capiral expendituter. with the renaining balance being due wiehin 90 dryk Tac059 3 For the exclusive use of S. Arndt, 2022. The Future Baed on extensive market nocarch, Marla ctimated thut sals would increse 28% in 2010 and that the companys cash on hand would need to grow at a rate consistent with sales growth to maintain adcquate cath for dily tranuctions. The company anticiputed apenting 51.035 million to build five new stores, induding two in Seartle, two in Bellevue, and one in buequah Outlys on property and equipment would continue to be depreciated over 15 yean fot as and reporting purpose. "The company's corporate tax rate was opected to remain at 400 . The company planned to maintain its dividend payments at $300, 000 per year for the fortereable futuse. As Amphlett and Ferris contemplated the company's growing need for additional cach, they wondeted whethe the companyi financial structure was the ileal arrangement. Thyy foresw increasing difficultio in future negotitions with Bank of America To abd to the compuny's difficulties, Vabre Ling (January 9, 2010) noted that. "The favter growing fat food will be Macican and Chinos food. Wese stagnant growch in other cthaic cuisine" 'It was accepted practice to dedect a hulf yrar i depocciation in the year equ"penent was acquired and a full year's depecciation each year thereafier. TBo0s9 For the exclusive use of S. Arndt, 2022. For the exclusive use of S. Arndt, 2022. TBOD Case Analysis Questions Statement of Cash Flows Ratios Aussie Pies, Inc. Statement of Cash Flows For the Year Ending December 31 Cash flow from operating activities 2007=2008=2009 Net income Depreciation (Increase) decrease in receivables (Increase) decrease in inventories Increase (decrease) in accounts payable Cash flow from operations Cash flow from investing activities Purchases of property and equipment Cash flow from investing \begin{tabular}{l|l|l|l|l|} \hline 0 & 0 & & 0 \\ \hline \end{tabular} Cash flow from financing activities Issuance (retirement) of short-term borrowing Issuance (retirement) of long-term borrowing Issuance (repurchase) of common stock Payment of dividend Cash flow from financing \begin{tabular}{l|l|l|l|l|} \hline 0 & 0 & & 0 \\ \hline \end{tabular} Net change in cash and cash equivalents Beginning cash and cash equivalents Ending cash and cash equivalents Check figures for ending cash In early 2010. Honza Muska, Chief Financial Officer of Aussie Pies, Inc., looked over the term loan agreement he had just signed with Sona Brabcova, head of commercial lending at Bank of America's regional headquarters in Seattle, Washington. It had been a tough negotiation, but Brabcova had reluctantly increased the credit limit from $2 million to $3 million, provided Aussie Pies was willing to agree to additional loan covenants, as well as additional collateral to secure the loan. Brabcova noted that the company's sales had increased substantially during the last few years, but that the company reported declining profits and higher debt. The company had made sales growth and increased brand awareness a top priority. Muska wondered whether the new loan agreement would permit the company to begin construction of five additional stores in 2010. Company Background In 2005, Anna Amphlett and Andrew Ferris established their first Aussic Pies retail outlet ar Pike Sereet Market in Seatte, Washington. Aussie Pies produced, marketed, and distributed "Aussie" meat pies. The business began with a single store, but by 2009 there were 10 stores, and an agreement with Costco to supply fresh Aussie Pies at their locations throughout North America. A meat pie is a hand-sized pot pie made with pastry and filled with minced (ground) beef and gravy, which is consumed as a takeaway food snack in Australia (sec Exhibit 1). Amphlett and Ferris discovered meat pies at an Australian Rules football game while on a vacation in Australia. They found that the average Australian consumed 45 meat pies per year, usually with several bottles of beer. The meat pic is about four inches in diameter and is traditionally eaten in the hands like a sandwich, with ketchup. The pic has a short crust bottom and a flaky pastry top. Amphlett and Ferris selected Pike Street Market because it was a popular destination with young tourists, particularly international visitors. Marketers often used Seartle as a test city for new foods because of Seattle's well-educated, higher income population, which consumed more ethic cuisine and exotic foods than many other major U.S. cities. Amphlett and Ferris both had extensive retailing experience. Amphlett was employed at Starbucks Coffee Corporation, headquartered in Seatule, where she gained valuable retailing experience as a regional manager. She had been involved in many different aspects of Starbucks' business induding personnel, supply chain, production, and business development. Ferris, an accountant by training, worked as an assistant controller at the Seattle headquarters of Tully's Coffee Corporation, where he had became familiar with the financial side of retailing, as well as customer service. Amphlett and Ferris decided to focus on upper-middle income customers between 30 and 50 years of age. Because these customers were weight- and diet-conscious, they decided to manufacture the pies with high-quality, low-far beef that had been range rather than lot fed. They also ensured shat the beef had been raised on ranches using no hormones or insecticides, and thcy also developed a marketing and sales campaign emphasizing the use of high-quality ingredients. Using beef raised under these Gnaeme Rankine for the parpose of dasroom discusion only and not to indicute cither fffrtive or in ffortier manngemeut. This document is authorized for use only by Suzanne Arndt in 2022. conditions would be more expensive, but they felt that this would be mote appealing to young, healthconscious customens who were willing to pay a pecmium for moperioe quility snack foods: They decided to muke the pies fresh at the shore rather than serve curtomen reheated products. This would occasionally mean disposing of unold pies, but Amphlet and Ferria concluded that reheating meat pies caused the sauce filling to permeate the pie base and malve the pie sogby, In addition, they encouraged customers to call in theit orders so that the meat pies could be made fresh on demand, further emphasizing the freshness appeal. Strict hygiene and sanitary conditions for making and serving the meat pies were put in place. Amphlett and Ferris came up with a design fot the stare in which the meat puis would be made at the back of the store with a glass wall pand separating the front section so that customers could see the spoclessly ckan facilities in which the pies were made. They felt that this wothl enhance the custumers' perception that Ausic Picr was a premium product using high-qualiry ingredients and produced under impeccably an arary conditions. The company alwo emphasizod ountanding castomer service - the store's sales staff was expected to greet regular cuitomers by name and to know their pie pneferences. Even their delivery truck drivers received exiensive customer service training. Based on marlict recanch, the price was set at $3.25 per pie. Ausie Pies aho offerod a moncy back guarantee-any customer could return all purchases with no questions asked, and would be offered two frec movic theatre paser as well. In 2006, the company's firs year of operatioss, sales reached 56 million, far aloove their initial expectarions of about $1 million. Duning 2006, they expanded the meres capaciry by acquiring a vacant space adjacent to the Pike Phoce Market store. In 2007 , the company expanded beyond the standard meat pie by introducing specialty pies such as steak and kidncy pies, meat and sun-dried tomato pies, chicken and potato pies, and cven Barramundi pies. 'These prodacts were sold in smaller quantities and required custom production techniques. Amphlett and Ferris also experimenoed with baking and distributing fresh breads, including wine hread. Barramundi bread, and Bodalla cheese bread. Ferris's experiments in making wine bread had been quite sucsesful, so they negoriatsd an agreement with the makers of the popular Australian wine, Yellow Tail, for co-branding the new wine bread. In 2007, they added an additional stone in suburban Bellevar. Washingtos, about 10 miles from the downtown Seatte store. In 2007, they also negotiated an agreemene to supply Contwo Wholecale Corporationi stores with freh pies. To meet increasing demand for meat pies, the company hited additional chefs, baking assistants, and sales staff. Delivery wo Costco sares made it necescary to acquire several trucks with oa-bourd heating equipment for the fresh-baked pies. Ferris made an appearance on The Tonight Show with Jay Leno after news reports that an Aussic Piec crac had hit Searte. Together with Amphlettis appearance on the Oprab Winficy. Slivele the free publiciry served to boost ales and brand awasenos. The flugrhip store even became a cult location, much as Starbuck' fint stose had hecome. In 2008 , Aassie Fies added two new stores, inchuling one done to Fioneer Square, a popular tourist destination, and another store in upscale lscaquah, Washington. During the same year, the camspany increased the price to $3.50 per pie to defray the cost of producing apecialry pies such as the steak and kidncy, and chicken and porato pies, The higher price did noe deter customers. In 2008, sales increaved to 58.28 million, up from 96.9 millaon in 2007 . In 2009, the company added sax more storex, induding one in Redimond, Waatington, close to Microsoft Comporation's headquartens (see Fxhibit 2 for information about the counpany's stures). It proved a fortunate decision because Aussie Pies became a sexple Innch item for many Microsofr employ- "A barramundi is a popular fah with Ausralian consumacn. It is unully pale grey geen with a coppery shimaner, and can grow to a masumumi length of 2m (6ff 7 in), welighing up to 60kg(130lb) specimiens wcithing 56ky 2 Bodalls cheese, a popoular cherie with Aatralian coinumen, w mule in Bedallh, Ausralin 2 TB00s9 ces. Sales rocecdod $13 million in 2000, despite a price increas to $3.75 per pie. Faco Ball Gates became a sogular caitomer. After the Sremer Timer scported that Gates favocise pie ras che Bartamandi pie, sales of specialty pies rocketed. To enhance ito service offering, Aussic Ries provided crodit to wholeale customers such as Contco. Safeway, By's Wholesale Club, and Sumi Cieb, on payment acrms of 20, 10, net 30. 'The coenpuay's wholesale customers, who accounted for approuimutely 60% of 2009 sales revenoes, generally took advantage of the credit available, while actail customers paid in cahh. As a rulc, wholealers gencrally scheduled their purchases in advance, coabling Ausie Pies to manafacture the pies on a just-in-time bavi.. Retail customers, however, gencrally cupected Ausuic Pies to have all of ies pies contianoualy on band and frech. Sometimes the coenpony had to throw away pics that had ar in doplay counters for too long to be considered fresh. To bwost sales to its wholewale cuatomen, the company became lesu strin: gent in granting them credit, and in moaitoring and collecting outuranding receivables, while continuing to parchase only the highest qualiry ingredients and supplics from rrpueable merchandisen. Sugpliens rypically offered Aasaie Pies credit termst of 24510, net 30 on its pushuses. Financial Situation To finance its rapid growth. Aassec Phes had relicd heavily on short-term loans from Bunk of America. which had recently increased the company's term loun to $3 maltian (Fahikit 3 provides bulance sheor and income ratement data foe the yean 2006-2009). The term loan wat funded (ee repaid) en june 30 of each yeat, and bote an iatenest rate of 6 Wh per yeat or about 100 basis points above the peime intereat rate. If Ausse Pies utilived at lear the maimum amount of the term loan, which Marla belioved would be necesary in 2010, the short-term interent odigation would be around 3146000 . The shart-term loan was secured by a lien on all of Aussie Phes acoounts roccivable and iaventories, while the loanis covenants specified minimum levels of working capital and net worth that had to be muincaincd. Another importaat wounce of financing fot Aussie Pies' working capital nocds orer the lust fow years had been the practice of aretching payatlen, ie. ddaying payments of accenanta payable to the company's supplices. Most suppliers offered terms of 20 10, net 30 , bat hassic Fries had itretched its payable to the point shat several of its uppliers had callod Andrew Ferris te complain abous sbe dowdown. Itetra Divisova, the CEO of Nurura Flour, Inc., called to ay ahe was aloo a senall business oweer who could sot afford to finance Aussie The' buaines. The company's outuanding long-term dcbt of $750.000, financed by Matt Feria, a belionuint McDonalds frandiisee and Andrew Fetrixis grandfather, was due and payable on fune 30, 2014. In 2009. Matt Fetris had provided 5250,000 in additional loans and indicaned that he woold be uswilling to increase his commitment to the busincsu, but that the inccreit rate of 8ll per ycar would nomain in cffect on all long-term debe. In 2009, Amphlet and Ferris invostod 5150.000 in additional oguiry in the business, but they were unable to inver mosc in the near term, and they mere also srlacrant to dilute their holdings by secking outide equity investon. The company's shost term bonus sheme paid incrative comprnation and was bosed an rarning bcfore interest, taxe, depteciation, and amortization (EBITDA). Under the plan, the bonds pool was 10% of EBITD A if EBITD A csewded 51 million, and acto otherwinc. To casuse that nep manapoment did not view cach outhys on capiral invesument as a free pood. Muska had rocendy recommended to the company's boued of directors that the bonus plan in the furute ahould be tuned on frre cach flow, which be defined as FBITDA less capital cypcnditues (CapFa), ar even cash flow from eperations lesu capiral expendituter. with the renaining balance being due wiehin 90 dryk Tac059 3 For the exclusive use of S. Arndt, 2022. The Future Baed on extensive market nocarch, Marla ctimated thut sals would increse 28% in 2010 and that the companys cash on hand would need to grow at a rate consistent with sales growth to maintain adcquate cath for dily tranuctions. The company anticiputed apenting 51.035 million to build five new stores, induding two in Seartle, two in Bellevue, and one in buequah Outlys on property and equipment would continue to be depreciated over 15 yean fot as and reporting purpose. "The company's corporate tax rate was opected to remain at 400 . The company planned to maintain its dividend payments at $300, 000 per year for the fortereable futuse. As Amphlett and Ferris contemplated the company's growing need for additional cach, they wondeted whethe the companyi financial structure was the ileal arrangement. Thyy foresw increasing difficultio in future negotitions with Bank of America To abd to the compuny's difficulties, Vabre Ling (January 9, 2010) noted that. "The favter growing fat food will be Macican and Chinos food. Wese stagnant growch in other cthaic cuisine" 'It was accepted practice to dedect a hulf yrar i depocciation in the year equ"penent was acquired and a full year's depecciation each year thereafier. TBo0s9 For the exclusive use of S. Arndt, 2022. For the exclusive use of S. Arndt, 2022. TBOD Case Analysis Questions Statement of Cash Flows Ratios Aussie Pies, Inc. Statement of Cash Flows For the Year Ending December 31 Cash flow from operating activities 2007=2008=2009 Net income Depreciation (Increase) decrease in receivables (Increase) decrease in inventories Increase (decrease) in accounts payable Cash flow from operations Cash flow from investing activities Purchases of property and equipment Cash flow from investing \begin{tabular}{l|l|l|l|l|} \hline 0 & 0 & & 0 \\ \hline \end{tabular} Cash flow from financing activities Issuance (retirement) of short-term borrowing Issuance (retirement) of long-term borrowing Issuance (repurchase) of common stock Payment of dividend Cash flow from financing \begin{tabular}{l|l|l|l|l|} \hline 0 & 0 & & 0 \\ \hline \end{tabular} Net change in cash and cash equivalents Beginning cash and cash equivalents Ending cash and cash equivalents Check figures for ending cash