Statement of cash flows

¶ … FY 2002, Candela has a poor year, with a loss of $7 million in cash from operations. The company shed a lot of cash as a result of this. While the company reduced its payables over the period, it also reduced its receivables significantly and saw a reduction in inventory. This means that there were a general reduction in working capital, to go with a net loss. The investing activities were straightforward in the purchase of equipment. The company took more of its cash and invested it the repurchase of treasury stock, something that often happens when the company's stock price is low. Overall, the company's cash position declined substantially in the year as the result of poor operating results in combination with the treasury stock repurchase. It is evident from the other subsequent years, and the previous years, that FY 2002 is an abnormal year for cash position, dropping from $32 million in the year to $19.6 million, and then back up to $31 million the subsequent year. The operating loss and treasury stock were both items that were probably a little bit unusual for the company, given that it should be increasing its business under the current demographic trends.

Candela's cash position improved significantly in FY 2003, however. On the top line, the company posted a positive net income, and this contributed 2/3 of the increase in the company's cash position. The company also reduced accounts receivable and payable further, but by lower increments than in the previous year. Equipment purchases were roughly on par with the previous year. The company did not retire any treasury stock, but instead issued stock. This stock issue was put towards debt repayment, altering the company's capital structure. Aside from the net income, the other major factor on the cash flow from operations was the dramatic increase in deferred income tax. Part of the reason the company's cash position improve so much is that it deferred a lot of its taxes.

In FY 2004, the company improved its top line (net income) again but overall had a much less positive cash flow from operations. It paid some of the taxes it accrued, and again faced a decline in accounts receivable. The provision for the disposal of discontinued operations potentially balances off much of the decrease in "other current assets." The company purchased less equipment than in previous years. Candela issued another round of common stock in FY 2004, and this issuance made a significant contribute to the company's increase in cash.