Interesting new forecast.
One would expect things are improving, if one didn't look deeper.
Please note that pg 32 of CCE's Y2000 report indicated that with the intangibles accounting change starting Jan 1, CCE's earnings in Y2000 would have been $1.13/sh. CCE's forecast indicates earnings could be as high as $0.85/sh. So two years later, if it is achieved, earnings are still sinking.
Taking this forecast, and deducting the Jan 1 intangibles accounting change with the Y2000 depreciation change, earnings are nil to losses when compared to Y1999 accounting methodology, imo.
Of course, CCE doesn't have much of a history of accurate forecasting. So many warnings these past 18 months...
I wonder if any of the KO/CCE watchers can explain the below paragraphs to me:
Coca-Cola Enterprises 2002 Net to Rise Up to 85 Cents (Update3)
By Courtney Schlisserman
>>>The company said it is negotiating a multiyear contract with Coca-Cola that will provide ``performance-based funding initiatives.'' It didn't immediately provide details. The bottler, which reduced forecasts twice this year and planned to cut 2,000 jobs, had been expected to receive funds from Coca-Cola to help it keep the prices it charges stores low, analysts said.
``Coke throwing more money at Coca-Cola Enterprises won't do anything to fix Coke's or CCE's problems,'' said analyst John Faucher of J.P. Morgan, who rates Coca-Cola Enterprises a ``market perform'' and doesn't own the shares. <<<
When did KO announce that it is subsidizing lowered prices at CCE? Which quarter were these sums paid? Is this because the 2H01 marketing initiatives evolved into price initiatives?
Well we've moved off center on cold drink infrastructure related party payment. I still think the cookie jar that was ordained is tainted accounting. But we are moving somewhere...
What are your thoughts now on the health of the Goodwill? How would you review this? This is a key concept to review if one is investing. It will be affecting decisions in the future.
Can an auditor who once approved KO to amortize the payment of a related party transaction, while CCE took the receipt of the same payment whole in the year given, be the auditor to approve the health of goodwill? After all, these are related parties. It doesn't pass the "fairly represents" test, does it? There's no way the same transaction can be both an investment and an expense.
When you get the next report and start analyzing, note the trends...
And when you note the trends, please take into account that CCE changed depreciation schedules in Y2000, adding $0.23/sh. So back this accounting change out. Also this year benefits from one time tax reductions, I believe, from Canada. So, back this out also.
Then let's talk about whatever you want and the real trends, not nominal trends...
Yes definetly we can argue over CCE's performance compare to PBG, now your point regarding the price CCE has paid for buying these independent bottlers and the price paid by PBG. I cant have an opinion since I dont really know the details of these transactions. It doesnt mean CCE overpaid for these franchises. Like I told you I am waiting for the next report to analyze it and then we can discuss it.
Jobu75, can you provide any insight on this post: http://messages.yahoo.com/bbs?.mm=FN&action=m&board=7078551&tid=cce&sid=7078551&
How is it that KO can call a payment it makes to CCE "an investment" and amortize the cost. But CCE calls it an expense and accepts the payment in full in the year given?
Is it an investment or an expense? I just don't understand how the same accounting/auditing firm can label it differently for each side of the transaction.
Shouldn't accountants have to treat both sides of a RELATED party transfer quite conservatively and clearly? Especially since KO has controlling ownership of CCE?
Jobu75, as a financially trained person, how do you justify this intriguing accounting, or am I wrong in my definitions? I note that last year the KO bottler PB was told to use the same time frame as KO, for this same program payment. It is in their 10K. But CCE didn't change their accounting even though they receive payment from the same KO incentive program.
Jobu75, how do you certify the health of CCE's goodwill? Would it change if CCE uses 5 years for the cold drink payment as does KO and PB?
Let's continue further on this idea of yours and put some framework on a discussion:
>>>Again take in consideration the environment in which CCE has been operating in the last couple of years and that might be part of the problem. <<<
1. For the territories it received franchise rights to, why for a given level of sales are frachise rights so, so, so much more than what it's competitor PBG paid? Do you see representative returns to justify such? I see the opposite.
2. How do you analyze the balance sheet and its health compared to it's competitor PBG? How do you see the trend in operations going? When looking at the operational trends, don't forget that in Y2000 CCE made a change in depreciation schedules resulting in an accountant's boost of $0.23/sh/yr in net income. And this year has one time tax benefits.
Like I said I havent looked the financial statements so I am not familiar with your observation. I will wait for the coming financial statements which are due next week I believe. Then we can discuss CCE performance, now remember CCE has been acquiring independent bottlers for the last 5 years plus there were a period of heavy capital expenditure the last couple of years. The pressure CCE expereince in prices and volume, will obiously affect their return in investment. But your point in valid regarding the low return on equity and investment.
Again take in consideration the environment in which CCE has been operating in the last couple of years and that might be part of the problem.
There is a lot of possibilities mentioned. Some conjecture. Mostly about how PEP/PBG's success is illusory or about to turn, and how KO/CCE's difficulties are dissipating.
That's worthy of discussion.
But my post regarded numbers and a balance sheet. And I see ROI at CCE so poor that your presentation doesn't support your forecast.
Why is CCE paying more for franchise fees than PBG and gaining in return less?
I believe that you have a lack of knowledge regarding what's goin on in the market place. Even though PBG balance sheet seems to be more solid than CCE. The future looks brighter for CCE and KO, let me tell you why. It is known that Frity lay has been the backbone of Pepsico for quite some time know. Pepsi has been able to keep prices low in their beverage segment with the help of Frito lay brands. How long can Pepsi do this? Apparently not anymore, comissions for their route sellers were cut last year from 5% to 3% almost 40%. As you can imagine moral is low among the employees that bring the money to Frito lay. Result less motivation to sell more cases. The move is clearindication that Frito lay cant keep funding Pepsico strategy of low prices in their beverage segment. Pepsi must rise their prices. The strategy of lowering prices to increase market share has not produce the results expected.
In the other hand KO has been increasing its dominance in the carbonate segment and increase its prescence inthe noncarboanted market. Dasani has been a tremendous success, showing the water is not a commodity. KO has created a great product and established a brand in less than 2 years. The new aggressive marketing of powerade which has increased its market share to almost 15% from 12% in the prior years. Also, there are many more products targeting the young consumers such as energy drinkers which command high prices, plus the introduction of non carbonated drinks which is the fastest growing segment.
CCE has been going to a lot of restructuring and has cut operating expenses, improving the use of assets that will begin showing results in the coming quarters. Example: merchandisers has been driving their own vehicle, trucks are being used 18 hours a day with drivers working 2 shifts, mornings from 5 to 2pm and afternoons from 3 to 11 pm.That's to mention a few changes that will reduce operating expenses increasing cash flow directly.
I will take a look at their balance sheet and comment on that later.