SUPERVALU is one of the largest grocery chains in the United States. Its February 23, 2013, statement of cash flows included the following (dollars in millions):

SUPERVALU Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in millions)

SUPERVALU Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)

REQUIRED:
a. Depreciation and amortization are added back to net earnings in the computation of net cash provided by operations. Does this mean that depreciation and amortization are sources of cash?
b. What is meant by “impairment charges”? What event would lead to such an expense? Why is it added back to net earnings?
c. Explain why the “gain on the sale” of assets is subtracted from net earnings, while “loss on sale” is added. Describe the entries that led to these disclosures.
d. Comment on the trends across time of the company’s current accounts, especially inventory and receivables.
e. Comment on the quality of the company’s earnings over the three-yearperiod.

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February 23, 2013 (52 weeks) February 25, 2012 (52 weeks) February 26, 2011 (52 weeks) Cash flows from operating activities $(1,466) (1,203) $ (1,040) Net loss Net loss from discontinued operations, net of tax Net loss from continuing operations Adjustments to reconcile net loss from continuing operations $ (1,510) (1,310) (200) (930) (263) to net cash provided by operating activities: Goodwill and intangible asset impairment charges Asset impairment and other charges Net (gain) loss on sale of assets and exits of surplus leases Depreciation and amortization LIFO charge Deferred income taxes Stock-based compensation Net pension and other postretirement benefits cost Contributions to pension and other postretirement benefit plans Other adjustments Changes in operating assets and liabilities: 6 92 110 283 63 365 4 (50) (25) 355 16 354 102 (98) 26 106 (83) 21 91 (154) 30 51 (69) 75 (52) 417 481 898 (26) (20) Receivables Inventories Accounts payable and accrued liabilities Income taxes payable Other changes in operating assets and liabilities (108) Net cash provided by operating activities-continuing operations Net cash provided by operating activities-discontinued operations Net cash provided by operating activities (27) 328 728 1,056 81 (53) 293 870 1,163 February 23, 2013 February 25, 2012 February 26, 2011 (52 weeks) (52 weeks) (52 weeks) Cash flows from investing activities Proceeds from sale of assets Purchases of property, plant, and equipment Other 38 29 (402) 3 (228) (323) (189) (175) (315) Net cash used in investing activities continuing operations Net cash (used in) provided by investing activities-discontinued operations (484) Net cash used in investing activities Cash flows from financing activities (364) (227) Proceeds from issuance of long-term debt Payments of long-term debt and capital lease obligations Dividends paid Net proceeds from the sale of common stock under option plans 1,713 (2,099) (37) 291 (700) (74) 180 (155) (74) and related tax benefits Payments for debt financing costs (66) (25) Payments for purchase of treasury shares Other Net cash used in financing activities-continuing operations Net cash used in financing activities-discontinued operations Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Less cash and cash equivalents of discontinued operations (496) (46) (542) (493) (94) (587) (15) 172 S 157 (93) (78) (897) (975) (39) 211 S 172 (93) 157 $ 149 (77) at end of year Cash and cash equivalents of continuing operations at end of year $ 72 S 64 S 79 SUPPLEMENTAL CASH FLOW INFORMATION The Company's non-cash activities were as follows Capital lease asset additions and related obligations Purchases of property, plant, and equipment included in Accounts payable S 44 $28 Interest and income taxes paid Interest paid (net of amount capitalized) Income taxes paid (net of refunds) $ 232 $ 31 S 227 S 73 S 201 S 11