A 13-44 Analyzing statements of cash flows (Learning Objectives 1, 2, & 3) Sears Holding Corporation (SHLD) announced in April 2016 that it would be closing 68 Kmart and 10 Sears stores during the second half of 2016. The stores it is closing have not been profitable for Sears, and it is looking to improve profitability with the closures. Similarly, Wal-Mart Stores, Inc. (WMT) announced in January 2016 that it would be closing 269 stores worldwide. Again, this move is an effort to increase profitability for Wal-Mart. Sears' fiscal year-end is the Saturday closest to January 31. Following are its statements of cash flows for the most recent three years. Sears Holding Corporation Statements of Cash Flows (in millions) Year Ended Jan.30,2016 Jan.31,2015 Feb. 1,2014 Operating activities: Net income (loss) $(1,128) $(1,810) $(1,116) Adjustments to convert to cash basis (1,039) 423 7 Net cash used by operations (2,167) (1,387) (1,109) Investing activities: Sales of property and investments 2,730 424 995 Purchases of PP&E 211 270 329 Other investing activities - 173 (2) Net cash provided by investing 2,519 327 664 Financing activities: Proceeds from issuance of debt - 1,025 994 Repayments of debt (1,405) (80) (83) Other increases (decreases) in debt 1,091 (1,117) 238 Dividends paid for Sears Canada (50) (27) (14) Other financing activities - 484 (233) Net cash provided (used) by financing (364) 285 902 Effect of exchange rates - (3) (38) Net change in cash (12) (778) 419 Cash, beginning of year 250 1,028 609 Cash, end of year $238 $250 $1,028 Wal-Mart's fiscal year-end is January 31. To follow are its statements of cash flows for the most recent three years. Wal-Mart Stores, Inc. Statements of Cash Flows (in millions) Fiscal Years Ended Jan.31,2016 Jan.31,2015 Jan.31,2014 Operating activities: Net income (loss) $15,080 $17,099 $16,695 Adjustments to convert to cash basis 12,309 11,465 6,562 Net cash provided by operations 27,389 28,564 23,257 Investing activities: Purchases of PP&E (11,477) (12,174) (13,115) Proceeds from disposal of PP&E 635 570 727 Proceeds from disposal of some ops 246 671 - Other investing activities (79) (192) (138) Net cash used by investing (10,675) (11,125) (12,526) Financing activities: Net change in borrowings 1,235 (6,288) 911 Proceeds from issuance of debt 39 5,174 7,072 Repayments of long-term debt (4,432) (3,904) (4,968) Dividends paid (6,294) (6,185) (6,139) Purchase of company stock (4,112) (1,015) (6,683) Other financing activities (2,558) (2,853) (982) Net cash provided (used) by financing (16,122) (15,071) (10,789) Effect of exchange rates (1,022) (514) (442) Net change in cash (430) 1,854 (500) Cash, beginning of year 9,135 7,281 7,781 Cash, end of year $8,705 $9,135 $7,281 Requirements 1. Using its statements of cash flows, answer the following questions about Sears: Is Sears generating cash from its operations? Describe what investing activities Sears has been involved in over the past three years. Are investing activities an overall source or use of funds for Sears? (NOT SOLVED) What financing activities has Sears been undertaking in the past three years? Has it been paying dividends to its common stockholders? (Note: Sears Canada is a holding that does not represent Sears common stockholders.) (NOT SOLVED) How will the closure of the Kmart and Sears stores impact the 2016 statement of cash flows? (NOT SOLVED) Using its statements of cash flows, answer the following questions about Wal-Mart : a. Is Wal-Mart generating cash from its operations? (NOT SOLVED) Describe what investing activities Wal-Mart has been involved in over the past three years. Are investing activities an overall source or use of funds for Wal-Mart? (NOT SOLVED) What financing activities has Wal-Mart been undertaking in the past three years? Has it been paying dividends to its common stockholders? (NOT SOLVED) How will the closure of the Wal-Mart stores impact the 2016 statement of cash flows? (NOT SOLVED) Judging from the statements of cash flows, which company, Sears, or Wal-Mart, is healthier? (NOT SOLVED) Why do you think Sears and Wal-Mart would have fiscal year-ends around January 31 rather than using a calendar year-end of December 31? (NOT SOLVED)
A 13-44 Analyzing statements of
Sears Holding Corporation Statements of Cash Flows (in millions)
|
|
|
Year Ended |
|
|
|
Jan.30,2016 |
Jan.31,2015 |
Feb. 1,2014 |
|
Operating activities: |
|
|
|
|
Net income (loss) |
$(1,128) |
$(1,810) |
$(1,116) |
|
Adjustments to convert to cash basis |
(1,039) |
423 |
7 |
|
Net cash used by operations |
(2,167) |
(1,387) |
(1,109) |
|
Investing activities: |
|
|
|
|
Sales of property and investments |
2,730 |
424 |
995 |
|
Purchases of PP&E |
211 |
270 |
329 |
|
Other investing activities |
- |
173 |
(2) |
|
Net cash provided by investing |
2,519 |
327 |
664 |
|
Financing activities: |
|
|
|
|
Proceeds from issuance of debt |
- |
1,025 |
994 |
|
Repayments of debt |
(1,405) |
(80) |
(83) |
|
Other increases (decreases) in debt |
1,091 |
(1,117) |
238 |
|
Dividends paid for Sears Canada |
(50) |
(27) |
(14) |
|
Other financing activities |
- |
484 |
(233) |
|
Net cash provided (used) by financing |
(364) |
285 |
902 |
|
Effect of exchange rates |
- |
(3) |
(38) |
|
Net change in cash |
(12) |
(778) |
419 |
|
Cash, beginning of year |
250 |
1,028 |
609 |
|
Cash, end of year |
$238 |
$250 |
$1,028 |
Wal-Mart's fiscal year-end is January 31. To follow are its statements of cash flows for the most recent three years.
Wal-Mart Stores, Inc. Statements of Cash Flows (in millions)
|
|
|
Fiscal Years Ended |
|
|
|
Jan.31,2016 |
Jan.31,2015 |
Jan.31,2014 |
|
Operating activities: |
|
|
|
|
Net income (loss) |
$15,080 |
$17,099 |
$16,695 |
|
Adjustments to convert to cash basis |
12,309 |
11,465 |
6,562 |
|
Net cash provided by operations |
27,389 |
28,564 |
23,257 |
|
Investing activities: |
|
|
|
|
Purchases of PP&E |
(11,477) |
(12,174) |
(13,115) |
|
Proceeds from disposal of PP&E |
635 |
570 |
727 |
|
Proceeds from disposal of some ops |
246 |
671 |
- |
|
Other investing activities |
(79) |
(192) |
(138) |
|
Net cash used by investing |
(10,675) |
(11,125) |
(12,526) |
|
Financing activities: |
|
|
|
|
Net change in borrowings |
1,235 |
(6,288) |
911 |
|
Proceeds from issuance of debt |
39 |
5,174 |
7,072 |
|
Repayments of long-term debt |
(4,432) |
(3,904) |
(4,968) |
|
Dividends paid |
(6,294) |
(6,185) |
(6,139) |
|
Purchase of company stock |
(4,112) |
(1,015) |
(6,683) |
|
Other financing activities |
(2,558) |
(2,853) |
(982) |
|
Net cash provided (used) by financing |
(16,122) |
(15,071) |
(10,789) |
|
Effect of exchange rates |
(1,022) |
(514) |
(442) |
|
Net change in cash |
(430) |
1,854 |
(500) |
|
Cash, beginning of year |
9,135 |
7,281 |
7,781 |
|
Cash, end of year |
$8,705 |
$9,135 |
$7,281 |
Requirements 1. Using its statements of cash flows, answer the following questions about Sears:
- Is Sears generating cash from its operations?
- Describe what investing activities Sears has been involved in over the past three years. Are investing activities an overall source or use of funds for Sears? (NOT SOLVED)
- What financing activities has Sears been undertaking in the past three years? Has it been paying dividends to its common stockholders? (Note: Sears Canada is a holding that does not represent Sears common stockholders.) (NOT SOLVED)
- How will the closure of the Kmart and Sears stores impact the 2016 statement of cash flows? (NOT SOLVED)
- Using its statements of cash flows, answer the following questions about Wal-Mart : a. Is Wal-Mart generating cash from its operations? (NOT SOLVED)
- Describe what investing activities Wal-Mart has been involved in over the past three years. Are investing activities an overall source or use of funds for Wal-Mart? (NOT SOLVED)
- What financing activities has Wal-Mart been undertaking in the past three years? Has it been paying dividends to its common stockholders? (NOT SOLVED)
- How will the closure of the Wal-Mart stores impact the 2016 statement of cash flows? (NOT SOLVED)
- Judging from the statements of cash flows, which company, Sears, or Wal-Mart, is healthier? (NOT SOLVED)
- Why do you think Sears and Wal-Mart would have fiscal year-ends around January 31 rather than using a calendar year-end of December 31? (NOT SOLVED)
Note: As per our guidelines, we will solve the first three subparts.
1.
No Sears is not generating cash from Operations because its net cash flows from operations are negative for all the 3 years.
2.
Sears had sold Properties and Investments in all of the 3 years. Also, it purchased PP&E for all the 3 years.
Only on Feb 1, 2014, it purchased Other Investments for 2 million and sold Other Investments on Jan 31, 2015, for 173 million.
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