Unscrambling Monday's Egg

Unscrambling Coca-Cola (NYSE: KO)
by Chick Kristin

Greetings and Happy Memorial Day to you from Tampa, Florida! I'm here with my husband and friends basking in the Florida rays. And what goes better with sunshine and friends? I know you know this answer. Your parched thirsts, and gritty, sandy teeth, know this answer... it's Coca-Cola of course. Because it's on my mind (and in my drink), I thought it would be appropriate to put KO through the Chicks' Dozen.

1. Buy What You Know  Coke Is It, The Real Thing, Enjoy! Do you live in Atlanta where every soda you drink is a Coke - orange Coke, white Coke, Diet Coke? Or, are you like my friend Tony who says nothing goes better with his coconut rum than a little Coca-Cola? It's refreshing, it's fizzy and its carbonated bubbles tickle my nose. KO and I are good friends.

2. K.I.S.S.  Keep it Simple Sister  Who couldn't explain Coca-Cola, Dasani, Fanta, Powerade, Sprite or Minute Maid to a 5th grader? The original Coca-Cola has been around for 114 years - if your child lives in this century, or was around for the last one too, he knows KO - it's excellent for loud burps and sugar buzzes, much to his mother's chagrin.

3. Industry  Beverages - Soft Drinks  It intrigues me how other people perceive growth and industry power. One of the other investment clubs using the Chicks' Dozen worksheet ranked KO a "C." But, I drink all kinds of products throughout the day; Coke, tea, coffee, water, orange juice and sport drinks when I run. Even if you don't drink as much, I know you have to drink something - you've got to satisfy your body's thirst. The beauty of Coca-Cola is that it offers brands for five of those six beverages I mentioned above. And I'm just one Chick in the hen house! So, in this Chick's humble opinion, the beverages industry is growing and will continue to do so as our international neighbors' tastes make their way to the good ol' U.S. of A.

4. Leader in Its Field  In my lifetime, two companies have owned the beverages market - PepsiCo and Coca-Cola. The Coca-Cola Company boasts the #1 and the #3 soft drink leaders with Coke and Diet Coke respectively. Because you're dying to know, Pepsi is #2.

You already know my preference, but the facts speak for themselves:

• Ranked #83 in the Fortune 500
• Member of S&P 500
• The world's leading manufacturer, marketer, and distributor of nonalcoholic beverage concentrates and syrups
• Has sponsored the Olympic Games since 1928

5. Repeat Profitability  KO hasn't raised the price of a can of Coke forever. I mean really, would you pay $2 for one can of pop? No, but even if you're willing to pay $1 at an overpriced hotel vending machine, it's just $1. What can you buy for $1 today? Answer - a great soda with a caffeine jolt to boot!

Note: The numbers below were taken KO's Quarterly Income Statement and Balance Sheet from quarter ending 3/31/01.

6. Gross Margins

Chicks like this number to be 50% or higher. KO is singing in harmony with a GM = 69.97%.

(Revenue - Cost of Revenue) / Revenue

(4479 - 1345) / 4479 =.6997 X 100 = 69.97%

7. Net Margins

Chicks like this number to be 8% or higher. KO's flying high with a NM = 19.27%

Net Income / Revenue

863 / 4479 = .1927 x 100 = 19.27%

8. Cash to Long Term Debt

Chicks love companies whose debt equals zero or is less than its cash. Coke is the real thing, as that 1.97X figure more than satisfies the Chicks' requirement!

Cash* / Long Term Debt

*cash, including short term investments

2678 / 1359 = 1.97x more cash than debt

9. Flow Ratio

Chicks look for companies who have their Balance Sheets in order. If the flow ratio is 1.25 or lower, it's a hen-pleaser.

(Total Current Assets - Cash*) / (Total Current Liabilities - Short Term Debt)

*Cash, including Short Term Investments
(7763 - 2678) / (9491 - 4739) = 5085 / 4752 = 1.07

WOW! No fizzle here! Chick Lynn, are you reading this? There might be hope for holding onto to Coca-Cola -- ALWAYS!

10. Increasing Growth

Revenues for 1st Quarter, Date Ending 03.31.01 = 4479

Revenues for 4th Quarter, Date Ending 12.31.00 = 5038

4479 - 5038 = -559

-559/ 5038 = -.1110 x 100 = -11.10%

KO's not ENJOYing these numbers.

11. Strong Management and History  Douglas Daft served as President and Chief Operating Officer of Coca-Cola from December 5, 1999 until he was elected Chairman of the Board and Chief Executive Officer on February 17, 2000. He earned many promotions, including expanded responsibilities for the Middle and Far East, Africa, the Schweppes Beverages Division and the Japan Division. Although I've never met Mr. Daft, I think he has the stuff to teach the world to sing. Daft has, and will continue to, set his sight on learning what his yet-to-be customers drink and get those to production before his competitors.

12. Buy on Sale  Can you say, "Blue Light Special, Martha?

52-Week High: 64

52-Week Low: 42.37

52-Week Average: 53.19

Current stock price: 48.10