Question

Analyze the statement of cash flows for Hydrogenics. Be sure to analyze the cash flows from operating activities, as well as the overall cash inflows and cash outflows for the firm.

Hydrogenics Corporation

Consolidated Statements of Cash Flows

Years ended December 31,

(in thousands of US dollars)

	2013	2012
Cash and cash equivalents provided by (used in):
Operating activities
Net loss for the year	$ (8,908)	$ (12,797)
(Increase) decrease in restricted cash	1,758	(1,607)
Items not affecting cash:
Loss on disposal of assets	3	7
Amortization and depreciation	712	870
Other finance losses, net (note 17)	2,065	438
Unrealized foreign exchange (gains) losses	(120)	(257)
Stock-based compensation (note 13)	631	577
Portion of borrowings recorded as a reduction from research and product development expenses or fixed assets (note 11)	(934)	(981)
Accreted non-cash interest (note 11)	349	288
Payment of post-retirement benefit liability (note 11)	(97)	(100)
Liabilities for compensation indexed to share price	4,223	768
Net change in non-cash working capital (note 25)	(8,879)	11,631
Cash used in operating activities	(9,197)	(1,163)
Investing activities
Proceeds from disposal of property, plant and equipment	-	26
Purchase of property, plant and equipment	(939)	(424)
Purchase of intangible assets	(32)	(2)
Cash used in investing activities	(971)	(400)
Financing activities
Payment of repayable government contributions (note 11)	(393)	(308)
Proceeds of borrowings, net of transaction costs (note 11)	1,782	1,621
Proceeds of operating borrowings	1,412	1,182
Repayment of operating borrowings	(1,412)	(1,182)
Common shares issued and warrants exercised, net of issuance costs (note 12)	7,280	5,178
Cash provided by financing activities	8,669	6,491
Effect of exchange rate fluctuations on cash and cash equivalents held	302	307
Increase (decrease) in cash and cash equivalents during the year	(1,197)	5,235
Cash and cash equivalents - Beginning of year	13,020	7,785
Cash and cash equivalents - End of year	$ 11,823	$    13,020
Supplemental disclosure
Income taxes paid	$    -	$    -
Interest paid	8	3
The accompanying notes form an integral part of these consolidated financial statements.

Note 25. Consolidated Statements of Cash Flows

Components of the net change in non-cash working capital are as follows:

	2013	2012
(Increase) decrease in current assets
Trade and other receivables	$  384	$  (1,632)
Grants receivable	17	108
Inventories	(973)	(2,678)
Prepaid expenses and other current assets	(64)	(289)
Increase (decrease) in current liabilities
Trade, other payables and provisions	(1,614)	984
Deferred revenue	(6,629)	15,138
Subtotal	$ (8,879)	$ 11,631
Liabilities for compensation indexed to share price	4,223	768
	$ (4,656)	$ 12,399

Answer 1

Analysis of cash flow statement:

Cash flow analysis shows that how changes in balance sheet accounts and income affect cash and cash equivalents. It shows that profit of the business and cash generation in the business is different thing.

Operating activities:

The company has incurred loss for both year 2012 and 2013.

Increase in restricted cash in 2012 shows that company has set aside the further $1,607 thousands for special purpose and decrease in restricted cash shows that company has used $1,758 thousands for the purpose specified.

Items not affecting cash shows that these items are reducing or increasing profit/loss of the company but these have no impact on cash and cash equivalent.

Net change in non cash working capital includes assets and liabilities. Increase in assets indicates that cash are blocked or cash are used in increasing the assets like increase in trade receivables implies that cash are blocked and not coming from customer, similarly decrease in trade receivables implies that cash receipts from customer is more than the credit sales.

Investing activities:

Proceeds from disposal of property, plant and equipment shows that assets are sold or discarded and cash received from sale or insurance company for discarded/damaged property. Purchase of property, plant and equipment or other tangible or intangible assets are used cash and cash equivalent and therefore decreases the cash by investing it in property.

Financing activities:

Financing activities are major source of cash inflow and outflow. In financing activities cash are generated through issue of shares, debentures and borrowing from financial and non financial institution. In this activities cash are used in repayment of loan, redemption of debentures, buy back of shares and payment of interest.

Effect of exchange rate fluctuation on cash and cash equivalent implies that cash are used/generated due to foreign currency exchange rate fluctuation.

In this problem there are no cash used for income taxes payment as the business has incurred loss in both year.

In the given cash flow in 2012 end of year cash and cash equivalent are increased due to net generation of cash flow whereas in year 2013 end of year cash and cash equivalent is less than beginning of year cash and cash equivalent due to net cash used in cash flow activities.