Walgreens Liquidity and Cash Flow
The Management's Discussion and Analysis, together with the Consolidated Statement of Cash Flows and Notes, provide insight into the company's sources and uses of cash.
Over the two-year period for the years ending August 31, 2009 thru 2011, the company has seen large cash outflows which affected its cash position and its liquidity. Net cash provided by operations declined from $4.1 billion in 2009 to $3.6 billion in 2011. Cash provided by operations was the principal source of funds for the Duane Read acquisition, for expansion, remodeling programs, shareholder dividends and stock repurchases (Walgreens, 2011).
Walgreens management attributes the decrease in net cash provided by operations to higher working capital. In part the cash flow decrease in working capital was offset by higher earnings, which increased by $708 million over the two-year period (Walgreens, 2011).
Walgreens' cash and cash equivalents...
Included in the company's cash and cash equivalents is cash on hand and all highly liquid investments having an original maturity of three months or less (Walgreens, 2011).
Cash provided by operations funded Walgreens investment in additions to property and equipment for $1.2 billion in fiscal year 2011. Walgreens added a total of 297 locations, a net addition of 164, which included the acquisition of 258 Duane Reade locations. Walgreens' expansion included 62 owned locations added during the year, with 44 under construction at fiscal year end. In addition to the Duane Reade chain, business acquisitions included the purchase of drugstore.com, Inc. (Walgreens, 2011).
The company used $2.0 billion for their stock repurchase program in 2011; in the previous year, Walgreens spent $1.8 billion to repurchase shares.…
Walgreens' cash flow using its 2011 annual report. Currently ranked as the largest drugstore chain in the U.S., Walgreens had its beginnings in 1901 when Charles R. Walgreen bought the Chicago drugstore where he worked as a pharmacist. Over the next two decades, Walgreen bought 20 additional stores, adding such features as soda fountains with luncheon service, as well as his own line of drug products. The company added
7 14949.4 16860 18861.8 19394.5 19933.7 20479 20882.2 Looking at these figures, we can see immediately that the most important assumption Gates has made with respect to free cash flow is that the project will go beyond the initial three years contract. The nominal value of the cash flows associated with those first three years does not equal the initial outlay. Thus, for the project to be profitable, the company must take it well beyond the three-year time