MMW,
Thank you for posting the cash flow summaries. But as one who has been critical of LU's recent cash flow, I must point out that the report is highly misleading for several reasons.
First, the report is cumulative. That means, for example, that the report indicates that cash flow from operations has been positive and growing for the last two quarters, not negative.
Second, cash flow from operations includes cash expenses for restructuring. Those charges were made in the past, and are non-recurring. Therefore, it is a mistake to assume that such cash expenses will be an on-going part of operations. The 10-K makes this clear. $141MM in such charges were taken during the year.
Third, The MSN definition of free cash flow is one that I am very uncomfortable with. I would not subtract dividends, nor would I include any financing or investing cash flows that are not related to the purchase or sale of capital expenditures or mergers. Thus, my estimate of FCF for the year is (<$276.0> +169.0 - $2,479 = <$2,586MM>), not the <$2,977MM> reported by MSN.
This is not to say that I am unconcerned. I am concerned because of the growth of receivables (up almost $3.2BB for the year), and inventories (up about $1.6 BB for the year).
In sum, then, I think it's a mistake to read the cash flow statements in a vacuum.
TTFN,
CTC |
