The statement of cash flows for Lands' End is reproduced here:

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?
b. 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?
Lands' End recently implemented a strategy of filling nearly all orders when the order is placed. In what year doyou believe the company implemented this strategy and how is the strategy reflected in the information containedin the statement of cashflows?

Transcribed Image Text:

LANDS' END, INC.&SUBSIDIARIES Consolidated Statements of Cash Flows FOR PERIOD ENDED (S in thousands) Cash flows from operating activities Year 9 Year 8 Year 7 Net income $31,185 64,150 50,952 Adjustments to reconcile net income to net cash flows from operating activities_ Pretax non-recurring charge Depreciation and amortization Deferred compensation expense Deferred income taxes Pretax gain on sale of subsidiary Loss on disposal of fixed assets Changes in assets and liabilities excluding effects of divestitures 12 18,73115,127 13,558 (5,948) (1,158 (7,805) 1.127 Receivables Inventory Prepaid advertising Other prepaid expenses Accounts payable Reserve for returns Accrued liabilities Accrued profit sharing Income taxes pavable (5,640 7,019675 21,468 (104,545) 22,371 (2,844) 7,44)4,75 (2,504)(1,366 (145 4,179 11,61 14,205 1,065 8,75 4.3 (2,030)1,3491,454 (5.899 (1.047 8 Other 39 Net cash flows from (used for) operating activities 74.260 (26,932 121,79 Cash flows from (used for) investing activities Cash paid for capital additions Proceeds from sale of subsidiary (46,750 (47,659(18,481 12 Net cash flows used for investing activities Cash flows from (used for) financing activities (46,750) (35,309) (18,481 Proceeds from short-term debt 6,505 21,24 1,876 Purchases of treasury stock issuance of treasury stock Net cash fows used for financing activities Net increase (decrease) in cash and cash equiv Beginning cash and cash equivalents Ending cash and cash equivalents (35,557) (45,899)(30,143 604 (27,207) (24,248) (27,663 S303S (86,489) $ 75,651 6,338 92,82717,176 6,641 6,33892,827 40