Interpreting Financial Statements: Cash Flow Effects
StorageTek’s consolidated statement of cash flows contained the following information, as abbreviated (dollars in thousands):
|
Year Ended |
||
|
December |
December |
|
|
31, 1993 |
25, 1992 |
|
|
Operating Activities |
||
|
Cash received from customers |
$1,532,183 |
$1,572,892 |
|
Cash paid to suppliers and employees |
(1,446,321) |
(1,456,835) |
|
Interest received |
54,251 |
67,136 |
|
Interest paid |
(40,519) |
(47,751) |
|
Income taxes paid |
(12,048) |
(28,327) |
|
Net cash from operating activities |
87,546 |
107,115 |
|
Investing Activities |
||
|
Short term investments, net |
(15,377) |
40,227 |
|
Purchase of property, plant, and equipment |
(67,720) |
(106,119) |
|
Business acquisitions, net of cash |
— |
(51,761) |
|
Other assets, net |
(6,945) |
(4,136) |
|
Net cash used in investing activities |
(90,042) |
(121,789) |
|
Financing Activities |
||
|
Proceeds from preferred stock offering |
166,479 |
— |
|
Proceeds from nonrecourse borrowings |
87,508 |
114,935 |
|
Repayments of nonrecourse borrowings |
(147,647) |
(169,005) |
|
Proceeds from other debt |
79,740 |
21,320 |
|
Repayments of other debt |
(44,144) |
(27,538) |
|
Other financing activities |
2,009 |
61,050 |
|
Net cash from financing activities |
143,945 |
762 |
|
Effect of exchange rate changes |
(4,341) |
(4,884) |
|
Increase (decrease) in cash |
$ 137,108 |
$ (18,796) |
Required
a. Identify and discuss any unfamiliar terms or unusual treatments in StorageTek’s cash flow statement.
b. Discuss the differences between net cash provided by operating activities and cash received from customers.
c. From the data above, evaluate StorageTek’s overall cash flows or cash balances at the end of each year.
d. What part of the balance sheet or cash flow statement would help you better evaluate StorageTek’s overall cash flows or cash balances at the end of either year? Why?
e. Given the following additional balance sheet and income statement data (dollars in thousands):
|
1993 |
1992 |
|
|
Net sales |
$ 902,482 |
$1,079,130 |
|
Net income (loss) |
(77,796) |
9,334 |
|
Interest expense |
43,670 |
48,706 |
|
Income taxes |
5,000 |
17,700 |
|
Total assets |
1,793,009 |
1,739,043 |
|
Long term debt |
361,718 |
369,988 |
|
Stockholders’ equity |
1,017,303 |
927,913 |
Calculate the following ratios for each year:
1. Cash return on assets (1993 only)
2. Quality of sales
3. Quality of income
4. Cash interest coverage
f. Based on these ratios, evaluate StorageTek’s performance. In what areas do the cash flow ratios indicate positive or negative performances?
g. What additional information would be useful in evaluating StorageTek’s performance?
h. StorageTek’s 1991 fiscal year ended on December 27.Would the difference in the number of days or number of weeks in each fiscal year affects any of the above analyses? Why?