The operating section of the 2012 consolidated statement of cash flows for Imation Corporation, a global technology company, is excerpted in the following table (dollars in millions):

Imation Corp.

Consolidated Statements of Cash Flows

REQUIRED:

a. Review the trends across time of depreciation. Does the company’s growth strategy seem to involve investing in property, plant, and equipment? Explain.

b. Why is stock-based compensation added back to net income?

c. Has the inventory balance increased or decreased during the years shown? Explain.

d. Explain the cash flows associated with the asset impairments and the obsolescence of inventory.

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Years Ended December 31, (in millions) 2012 2011 2010 Cash Flows from Operating Activities: $(340.7) $(46.7) $(158.5) Net loss Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 35.8 36.7 41.8 Stock-based compensation 7.3 7.5 6.9 Deferred income taxes and valuation allowance 5.7 (2.9) 57.0 Goodwill, intangible, and other asset impairments 285.7 8.6 54.7 Inventory write-offs 2.3 9.1 14.2 3.1 Pension settlement 2.4 2.8 Changes in fair value of contingent consideration (8.6) Other, net 2.9 11.8 8.0 Changes in operating assets and liabilities: Accounts receivable 23.7 28.0 59.7 Inventories 45.8 (12.2) 16.1 (9.1) Other assets 1.3 53.7 Accounts payable 13.6 (44.0) (17.7) (47.1) Accrued payroll and other liabilities (17.7) (19.8) Restricted cash 4.2 1.2 Net cash used in operating activities (8.5) (16.3) 151.4