Assignment
Analyze Mechan Systems Company's statement of cash flows
Mechan Systems Company develops, manufactures, markets, installs and supports a wide range of standards-based LAN and WAN connectivity hardware and softwai products. The company's statements of cash flow for the years 2010-2012 follow. Then the relevant portion of Management's Discussion and Analysis of the statemei of cash flows is provided.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended February 29, 2012, and February 28, 2011 and 2010
(in thousands)
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Cash flows from operating activities:
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2012
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2011
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2010
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Net income
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$ 164,418
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$ 161,974
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$ 119,218
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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32,061
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26,832
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17,335
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Provision for losses on accounts receivable
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356
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72
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1,734
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Loss on disposals of property, plant and equipment
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93
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174
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113
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Deferred taxes
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(38,766)
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(4,434)
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(6,151)
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Changes in assets and liabilities:
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Accounts receivables
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(55,101)
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(27,698)
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(17,707)
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Inventories
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(50,483)
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(23,080)
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(8,758)
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Prepaid expenses and other assets
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(18,844)
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(3,123)
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1,211
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Accounts payable and accrued expenses
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62,908
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11,336
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22,003
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Income taxes payable
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3,705
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10,476
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(3,924)
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Net cash provided by operating activities
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$ 100,347
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$ 152,529
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$ 125,074
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Cash flows from investing activities:
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Capital expenditures
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$ (65,035)
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$ (63,091)
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$ (39,399)
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Purchase of available-for-sale securities
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(79,427)
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(71,598)
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(30,097)
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Purchase of held-to-maturity securities
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(205,852)
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(282,712)
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(258,517)
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Maturities of marketable securities
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208,922
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323,682
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197,406
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Net cash used in investing activities
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$(141,392)
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$ (93,719)
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$(130,607)
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Cash flows from financing activities:
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Repayment of notes receivable from stockholders
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$ 174
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$ 131
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$ 66
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Repurchase of common stock
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(1,173)
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(13,070)
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-
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Tax benefit of options exercised
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7,215
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5,712
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6,980
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Common stock issued to employee stock purchase plan
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3,323
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2,287
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1,637
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Proceeds from stock option exercise
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16,021
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4,887
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7,185
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Net cash provided by (used for) financing activities
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$ 25,560
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$ (53)
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$ 15 868
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Effect of exchange rate changes on cash
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$ 166
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$ 712
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$ 161
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Net increase (decrease) in cash and cash equivalents
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$ (15,319)
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$ 59,469
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$ 10,496
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Cash and cash equivalents, beginning of year
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114,032
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54,563
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44,067
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Cash and cash equivalents, end of year
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$ 98,713
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$ 114,032
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$ 54,563
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Cash paid during the year for:
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Income taxes
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$ 105,233
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$ 68,420
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$ 67,263
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Management's Discussion and Analysis
Net cash provided by operating activities was $100.3 million in fiscal 2012, compared to $152.5 million in fiscal 2011 and $125.1 million in fiscal 2010. Capital investment for fiscal 2012 of $65.0 million included $9.8 million for building costs of which $3.4 was for the purchase of an engineering building, $21.4 million f engineering computer and computer related software and equipment, $5.5 million for manufacturing and related equipment and $19.0 million for expanding global sales operation During fiscal 2011, capital expenditures of $63.1 million included approximately $8.2 million for building costs related to expanding manufacturing and distribution capacities ai enlarging worldwide sales operations, $12.5 million for manufacturing and manufacturing support equipment and $15.0 million for engineering computer and computer relat equipment. Another $15.0 million was spent in support of expanded global sales activities. During fiscal 2010, capital expenditures of $39.4 million included $3.9 million on building $10.1 million on engineering equipment, $7.8 million on manufacturing capacity expansions and $2.0 million to equip new sales offices. Cash, cash equivalents and marketable securities increased during fiscal 2012 to $407.0 million, from $345.9 million in the prior fiscal year. State and local municipal bonds approximately $264.2 million, maturing in approximately 1.5 years, were being held by the Company at February 29, 2012. At February 29, 2012, the Company did not have any short or long term borrowing or any significant financial commitments outstanding, other than those required in the norm course of business. In the opinion of management, internally generated funds from operations and existing cash, cash equivalents and marketable securities will be adequate to support the Company working capital and capital expenditures requirements for both short and long term needs.
Required
a. Which method did the company use in arriving at net cash flows from operating activities?
b. Did current assets other than cash increase or decrease during the year ended February 29, 2012?
c. Did current liabilities increase or decrease during the year ended February 29, 2012?
d. What were the main investing activities during this three-year period?
e. What was the main source of cash from financing activities during the three-year period?
f. Did the company pay any interest expense during the year ended February 19, 2012?
g. Given the following data, calculate the cash flow per share of coimnon stock ratio, the cash flow margin ratio, and the cash flow liquidity ratio. How do these ratios compare with tl ratios shown for other companies in the chapter?
(in thousands) Average number of shares of common stock outstanding 71,839 Net sales $1,069,715 Cash and marketable securities 253,540 Current liabilities 164,352
Alphabetical Number
Required:
a. Which method did the company use in arriving at net cash flows from operating activities?
b. De current assets other than cash increase or decrease during the year ended February 29, 2012?
c. Did current liabilities increase or decrease during that year ended February 29, 2012?
d. What were the main investing activities during this three-year period?
e. What was the main source of cash from financing activities during the three-year period?
f. Did the company pay any interest expense during the year ended February 19, 2012?
g. Given the following data, calculate the cash flow per share of commit stock ratio, the cash flow margin ratio, and the cash flow liquidity ratio. How do these ratios compare with the ratios shown for other companies in the chapter?
i. Cash flow per share of common stock ratio:
ii. Cash flow margin ratio:
iii. Cash flow liquidity ratio: