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Author: TMFVerve Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 20454  
Subject: Re: thoughts on gross margins Date: 10/10/1999 2:10 PM
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Albert,

Okay, I've found the incriminating evidence. For those with the red glossy annual, it's in the right column of page 46. For those trying to find it online, it is (by incredible coincidence) also on page 46. Go to the following link, scroll to page 46, then go back to the top portion:

http://quote.fool.com/sec/sectext.asp?CIK=21344&Directory=21344&Year=99&SECIndex=5&nStartLoc=371850&nEndLoc=572071&symbols=KO

Albert, I'm with you on this issue. It's ludicrous the way Coke is exhibiting its KO side as very capital efficient, while the CCE side drowns in debt. The whole notion of CCE's "cash operating profit" is a joke. CCE includes the non-cash depreciation expenses as part of its cash operating profit, even though those depreciation expenses represent a true economic cost. For the past 3 years, CCE's annual capital outlays (CASH) have been HIGHER than the non-cash depreciation expenses. Here's a link to the cash flow statement from the '98 10-K:

http://quote.fool.com/sec/sectext.asp?CIK=804055&Directory=950144&Year=99&SECIndex=3176&nStartLoc=278415&nEndLoc=283274&symbols=CCE

Here's how CCE's free cash flow (operating cash flow less net cap ex) looks for the past 3 years:

1998 1997 1996
Operating Cash Flow 946 942 1006
- Investments in Capital Assets 1551 967 622
+ Fixed Asset Disposals 17 20 12
------------------------------------------------------
= Free Cash Flow -588 -5 396

Ain't that a thing of beauty?!

Albert, you've opened my eyes to what's really going on within Coca-Cola. And it's not a pretty sight. KO is propping up its suffering siamese brother with "marketing support" so that it won't become insolvent. All so that KO won't have to consolidate the capital intensive portion of its business.

Hmmm, I've really got to give this whole issue more thought. Thanks again, Albert.

Matt


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