20 MIDDLEBY CORPORATION AND SUBSIDIARIES The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. CONSOLIDATED STATEMENTS OF CASH FLOWS For the fiscal years ended January 1, 2005, January 3, 2004 and December 28, 2002 (in thousands) 2004 2003 2002 CASH FLOWS FROM OPERATING ACTIVITIES -  Net earnings $ 23,588 $ 18,698 $ 6,102 Adjustments to reconcile net earnings to net cash provided by operating activities -  Depreciation and amortization 3,612 3,990 6,280 Debt extinguishment 1,154 — 8,087 Deferred taxes 7,574 1,386 (1,904) Non-cash adjustments to acquisition integration reserves (1,887) — — Unrealized (gain) loss on derivative financing instruments (265) (62) 326 Non-cash equity compensation 119 — — Unpaid interest on seller notes — 567 2,340 Cash effects of changes in -  Accounts receivable, net (2,980) 4,792 (2,700) Inventories, net (7,004) 2,136 1,719 Prepaid expenses and other assets (10,193) (1,176) 516 Accounts payable (682) (1,587) 1,998 Accrued expenses and other liabilities 5,486 1,046 (3,232) Net cash provided by operating activities 18,522 29,790 19,532 CASH FLOWS FROM INVESTING ACTIVITIES -  Additions to property and equipment (1,199) (1,003) (1,087) Acquisition of Blodgett (2,000) (19,129) — Net cash (used in) investing activities (3,199) (20,132) (1,087) CASH FLOWS FROM FINANCING ACTIVITIES - Net (repayments) proceeds under previous revolving credit facilities (1,500) 1,500 (13,885) Net (repayments) proceeds under previous senior secured bank notes (53,000) (12,000) 24,500 Proceeds under new revolving credit facilities 51,265 — — Proceeds under new senior secured bank notes 70,000 — — Repayments under subordinated senior note — — (25,013) Proceeds (repayments) under foreign bank loan — (2,400) 2,400 Debt issuance costs (1,509) — (1,346) Retirement of warrant associated with note obligation — — (2,688) Repurchase of treasury stock (77,187) — — Issuance of treasury stock — — 300 Payment of special dividend (3,696) (2,301) — Net proceeds from stock issuances 349 617 15 Shareholder loan — 200 (300) Other financing activities, net — — (47) Net cash (used in) financing activities (15,278) (14,384) (16,064) EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS - 106 — — CHANGES IN CASH AND CASH EQUIVALENTS - Net increase (decrease) in cash and cash equivalents 151 (4,726) 2,381 Cash and cash equivalents at beginning of year 3,652 8,378 5,997 Cash and cash equivalents at end of year $ 3,803 $ 3,652 $ 8,378