Management’s Discussion and Analysis of Financial Condition  and Results of Operations (Continued) event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at its inception. The recognition of the liability is required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. FIN 45 also requires additional disclosures related to guarantees. The recognition measurement provisions of FIN 45 are effective for all guarantees entered into or modified after December 31, 2002. FIN 45 also requires additional disclosures related to guarantees in interim and annual financial statements. Accordingly, the Company adopted the pro- visions of FIN 45, effective January 1, 2003. The implementation of FIN 45 did not have an impact on the earnings or the financial position of the Company. The Statements of Cash Flows reflect the following  (in thousands) : Net cash flows from operating activities increased approximately $19.3 million in 2003, as a result of a $3.6 million increase in income from continuing operations, as well as: Net cash flows from operating activities declined approximately $16.0 million in 2002, despite the $6.6 million increase in income before the cumulative effect of change in accounting principle for goodwill. The lower net cash flows from operating activities in the current year is primarily attributable to: a) A smaller increase in accounts receivable for 2003. The increase in accounts receivable was lower than 2002, even though sales were higher in 2003, due to a reduction in the days sales outstanding in receivables to approximately 19 days. This was due to the timing of collections. b) A decline in inventories this year, excluding the effect of business acquisitions, compared to an increase in inventories in the prior year. The decline in the current year resulted from a concerted effort by management to reduce inventories at all locations, as well as strategic buying of certain raw materials at December 31, 2002. The inventory decrease is substantially all in raw materials, as there was only approximately a two week supply of finished goods on hand at December 31, 2003 and 2002. The impact of the rise in steel prices on inventory and the Company’s strategic buying of steel before the steel price increases took effect, did not impact inventory until 2004. c) A decline in prepaid expenses and other current assets compared to an increase in the prior year. The decline in 2003 was primarily due to the utilization of prepaid Federal income taxes and an escrow deposit, both of which were uses of cash in 2002. d) The above items were partially offset by a smaller increase in accounts payable, accrued expenses and other current liabilities. This change is primarily from the timing of payments and purchases at the end of 2003. Trade payables are generally paid within the discount period. a) An increase in accounts receivable due to the increase in sales over the prior year. Days sales outstanding of receiv- ables were the same at December 2002 as they were at December 2001. b) An increase in inventories this year compared to a decline in inventories in the prior year. Inventories at December 31, 2002 are up 46 percent from December 31, 2001 compared to a 26 percent increase in sales in the fourth quarter. The difference is partially attributable to strategic buying of certain raw materials. The inventory increase is substantially all in raw materials; there is only approximately a two week supply of finished goods on hand at December 31, 2002, and December 31, 2001. c) The above items were partially offset by the increase in accounts payable, accrued expenses and other current liabilities resulting primarily from the timing of payment due dates and purchases. Trade payables increased in proportion to the increase in inventories. Accruals for incentive compensation based upon profits (affecting in excess of 150 employees) were $1.8 million higher than at December 2001. 14 Cash Flows from Operations LIQUIDITY AND CAPITAL RESOURCES Year Ended December 31, 2003 2002 2001 Net cash flows provided by operating activities $ 31,541 $ 12,200 $ 28,166 Net cash flows used for investing activities $(12,392) $(12,013) $(17,141) Net cash flows used for financing activities $(10,684) $ (1,062) $(10,060)