Year 7 $ 50,952 653 13,558 317 994 325 LANDS' END, INC. & SUBSIDIARIES Consolidated Statements of Cash Flows FOR PERIOD ENDED ($thousands) Year 9 Year 8 Cash flows from operating activities Net income.... $31,185 $ 64,150 Adjustments to reconcile net income to net cash flows from operating activities, Pretax nonrecurring charge.... 12,600 Depreciation and amortization. 18,731 15,127 Deferred compensation expense. 323 Deferred income taxes. (5,948) (1,158) Pretax gain on sale of subsidiary (7,805) Loss on disposal of fixed assets. 586 1,127 Changes in assets and liabilities excluding effects of divestitures Receivables (5,640) (7,019) Inventory..... 21,468 (104,545) Prepaid advertising (2,844) (7,447) Other prepaid expenses (2,504) (1,366) Accounts payable. 4,179 11,616 Reserve for returns 1,065 944 Accrued liabilities 6,993 8,755 Accrued profit sharing (2,030) 1,349 Income taxes payable (5,899) (1,047) Other ... 1,665 64 Net cash flows from (used for) operating activities. 74,260 (26,932) Cash flows from (used for) investing activities Cash paid for capital additions (46,750) (47,659) Proceeds from sale of subsidiary 12,350 Net cash flows used for investing activities (46,750) (35,309) Cash flows from (used for) financing activities Proceeds from short-term debt 6,505 21,242 Purchases of treasury stock. (35,557) (45,899) Issuance of treasury stock 1,845 409 Net cash flows used for financing activities. (27,207) (24,248) (675) 22,371 4,758 (145) 14,205 629 4,390 1,454 8,268 394 121,795 (18,481) (18,481) 1,876 (30,143) 604 (27,663) $ (86,489) Net increase (decrease) in cash and cash equivalents..... $ 303 Beginning cash and cash equivalents 6,338 Ending cash and cash equivalents.. $ 6,641 92,827 $ 6,338 $ 75,651 17,176 $ 92,827 Required: a Lands' End recently implemented a strategy of filling nearly all orders when the order is placed. In what year do you believe the company implemented this strategy and how is the strategy reflected in the information contained in the statement of cash flows? 6. Explain how the following items reconcile net income to net cash flows from operating activities: (1) Depreciation (2) Receivables (3) Inventory (4) Reserve for returns c. Calculate free cash flows for each year shown. d How does Lands' End use its free cash flow? Do you think its use of free cash flows reflects good financial strategy