Review the Statements of Consolidated Cash Flows (page 42). In the Operating Activities section, depreciation is added back to Net income in determining Net operating cash. Assume that Sherwin-Williams, based on a detailed study, determines that its property, plant & equipment should be depreciated over a shorter time horizon, resulting in depreciation and amortization increasing from $172,074 to $202,074. Ignoring any tax effects, what impact would such a change have on Net operating cash? Explain.
Statements of Consolidated Cash Flows (thousands of dollars) Year Ended December 31 2015 2016 2014 Net income.... $1,132,703 \1,053,849 865,887 Adjustments to reconcile net income to net operating cash: 172,074 25,637 10,688 63,759 42,932 3,038 169,087 29,858 Amortization of intangible assets Impairment of goodwill and trademarks Amortization of credit facility and debt issuance costs . Provisions for Provisions for qualified exit costs Deferred income taxes.-..-- Defined benefit pension plans net cost- Stock-based compensation expense .-. . . . . . . Net decrease in postretirement liability.. .. Decrease in non-traded investments (Gain) loss on sale or disposition of assets. . . . Other 3,224 36,046 13,578 . . 3,096 31,071 9,761 4,976 14,851 109 (12,373) 64,689 (30,564) 990 72,342 (6,645) 65,144 64,735 63,365 (3,021) Change in working capital accounts: (113,855) (52,577) (118,893) (80,252) (101,112) 78,603 13,187 (Increase) in accounts receivable (56,873) (40,733) (Decrease) increase in accounts payable (Decrease) increase in accrued taxes . . . . . . . . Increase (decrease) in accrued compensation and taxes withheld (Increase) decrease in refundable income taxes Other 60,632 (1,343) 56,215 4,606 (13,128) 19,230 (36,601) (20,029) (9,676) (955) Costs incurred for environmental-related matters Costs incurred for qualified exit costs .. . . . (6,267) 5,594 (6,652) 1,081,528 Net operating cash 1,308,572 1,447,463 Investing Activities Capital expenditures Proceeds from sale of assets Increase in other investments (239,026) (234,340 (200,545) (65,593) (288,633) 38,434 . (303,774) Net investing cash Financing Activities Net (decrease) increase in short-term borrowings Proceeds from long-term debt- Payments of long-term debt Payments for credit facility and debt issuance costs Payments of cash dividends Proceeds from stock options exercised Income tax effect of stock-based compensation exercises and vesting Treasury stock purchased (310,050) (899) 500 (630,226) 591,423 (312,082) 249,647) (215,263) 89,990 89,691 86,831 100,069 68,657 (1,035,291) 1,488,663) (15,473) (307,353) (13,396) 684,049 205,744 (42,384) Net financing cash Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year.. .. . . . Taxes paid on income Interest paid on debt (980,353 1,467,075) 13,465) 165,012 40,732 (8,560) 04157) 744,889 889,793 205,744 40,732 s 477,786 \ 335,119 310,039 67,306 153,850 48,644 See notes to consoidated financial statements 42
