Will someone please tell me why it is that only a handful of U.S. companies do their shareholders the courtesy of providing cash flow statements with their quarterly earnings releases, but whenever a foreign company issues an earnings release, it nearly always provides a detailed breakdown of its cash flows?
I don't get it. Aren't we supposed to be setting an example of good corporate governance, shareholder-friendliness, and all that good stuff, for them?
Anyway, let's have another round of applause for the latest foreign filer to clearly disclose to its shareholders how well it's been doing. In this case, it's Russian dairy and juice concern Wimm-Bill-Dann (NYSE:WBD) that deserves the accolades.
In a detailed filing last week, the company noted that its free cash flow (FCF) has taken a bit of a dive over the past six months, in comparison with the year-ago period. In this regard, I should clarify that when calculating FCF for Wimm, I'm considering "cash paid for acquisition of subsidiaries, net of cash acquired" as constituting a "capital expenditure," to be deducted from cash generated from operations. The reason: It's an integral part of Wimm's expansion strategy to continue buying up smaller dairy and juice concerns (and lately, baby food factories) in its quest to dominate the dairy and juice market in the former Soviet Union. It seems these expenses may continue for some time, and if Wimm wants to expand its capacity and its sales by buying up existing plants rather than building new ones, I think its free cash flow numbers should be adjusted to reflect that.
And so, in the first half of 2004, Wimm generated $23.8 million in FCF; one year later, the company now reports having generated just $16.5 million in the first six months of 2005. That's not a good trend, especially when you note that the decline in FCF is mostly due to a rise in inventories. For a manufacturer of perishable foods, that would seem a dangerous development -- one that bears watching.
Better news lies in how Wimm spent the cash it did generate. Over the past year, Wimm's long-term "loans" have declined by $4.5 million; its long-term "notes payable" by $51.7 million. True, about $25 million of those amounts shifted to Wimm's short-term payables line entries, but even so, it looks like Wimm managed to pay off about $30 million worth of its debts over the past year -- a development that should contribute to even stronger cash flow in the future since less of its cash will be earmarked for interest payments.
Fool contributor Rich Smith does not own shares in Wimm-Bill-Dann.
