Lizzie, there is no such thing as pro-forma cash flow.
Or pro-forma shareholders' equity. Either the company is increasing shareholder's equity or it is not. And all the cash flow from operations doesn't matter if the company is turning around and pissing it away somewhere else. What's not clear about this?
You claim that two years ago the company was generating cash at the rate of 2 B$/quarter, and this year at 1.3-1.6 B$ per quarter.
If that was all there is to it, then over the past two years we should expect to see evidence of at least 12 B$ more "stuff" kicking around than they had two years ago. Minus any of what they spent to buy back shares. We know they've spent 3 B$ on share buybacks, so that leaves us expecting 9 B$ more now than they had two years ago. That is, if you are indeed correct in your views.
Let's go looking.
Here are the tallies
January 2003 2002 2001
Cash & Equiv: 21,197 21,456 17,951
Shareholder Equity 28,455 28,656 29,491
Shares 7,217 7,309 7,121
Despite cash, equivalents and investments having increased by about 3 Billions, shareholder equity has declined in the past two years by about a billion dollars. And shares have gone up by about 100 million, not down. Despite buybacks.
We went looking for 9 Billions increase in wealth and instead found 1 Billion less and another 100 Million shares outstanding.
And yet you think this company has been "generating" cash? No, it has been converting assets into cash.
Kind of like if you have a checking account and cash in your pocket. Withdrawing cash from the checking account results in positive cash flow. But doesn't make you any wealthier. If you then take this cash and pay people to write you checks which you deposit into your bank account, and withdraw the cash later... well you can generate quite a lot of cash flow! But this doesn't make you any wealthier either.
But the cash flow? Well, it's impressive!
As far as wondering about that 7 Billions? No need to wonder. The company publishes very detailed results. Open the 10-K and the 10-Q and look at the consolidated statements of comprehensive income.
There's no such thing about pro-forma assets. However the company wants you to see it, it all has to show up somewhere in the end. And if you think you see something yet the effects you expect don't show up then it's useful questioning whether (a) what you saw was real, or (b) what opposite stuff is going on that you aren't seeing.
John |
