06 December 2011
I was talking to a client about the state of our economic conditions here in the U.S. We both agreed things seemed to be slower than they were in 2003, 2004, 2005, 2006, and 2007. However; as we look at corporate profits that are being reported we see record profits and profits that are higher than they were in 2007-2008. And so we began to ask, “how are these large companies doing it.” And that lead me to begin to research different companies and I began to look at some of the largest companies in America and to see what exactly has been going on here behind the scenes. Some of the research and data that I discovered, was very interesting.
What I looked at were four of the largest companies in America; Coca Cola, Procter & Gamble, Exxon Mobile, and Microsoft. These are in four different industries and they are also extremely large companies, with Exxon arguably being the largest company in the United States of America.
As we look at Coca Cola their fiscal calendar ends at the end of the calendar year, which is December 31st. And from December 31st, 2007 to December 31st, 2010 Coca Cola’s revenues have gone up an 21.7%. Now, over a three year time period typically 21.7% would not be that astonishing. However, to me our economy has been very weak over the past three years and so to me that is impressive, that Coca Cola has been able to raise their revenue 21% (total) over the last three years. Also, their profit is up from $18 billion (in 2007) to $22 billion (2010). Additionally, something else that Coca Cola has done, if you look at their balance sheet, is that they’ve doubled the amount of cash that they have on hand, They’ve gone from $4 billion in cash (at the end of 2007) to $8.5 billion in cash (at the end of 2010). So as we look at that we see that their cash has gone up tremendously. And then as we look at long term debt we see that the public begins to unravel. Coca Cola’s long term debt went from $3.2 billion at the end of 2007 all the way up to $14 billion at the end of 2010. So that is a 428% increase, or four times higher than what their debt was just three years ago. So we can see that yes their revenues are up 20% over the last three years, their profits are up, their cash has doubled, gone from $4 billion to $8.5 billion, but Coke has also taken on $11 billion more in long term debt. So that is certainly problematic and something that they will have to pay back, that they must pay back. Coke also has more than doubled their total debt. And so when you look at that it does begin to make sense, at least with Coca Cola, that they certainly have not made it through this recession unscathed. In fact, when you increase your debt by four times or 428% it would appear as though Coca Cola has been weakened during this recession as one would suspect.
Looking at Procter & Gamble, they did the best to me, of the four companies. Procter & Gamble total revenue is up only 4% over the past three years and their calendar ended on June 30th, 2011 and we have data going back to June 30th, 2008. Their gross profit is also up a small amount over that three year time period, which I think could be impressive. Procter & Gamble’s cash is down from $3.3 billion to $2.7 billion, which means it’s down about 16.45% over the three year time period ending June 30th, 2011, which is about what you would expect, if not much worse for this recession that we’ve been in. But the question is what did Procter & Gamble do with their total long term debt? During this recession Procter & Gamble has actually lowered their long term debt by $1.5 billion. From $23.5 billion down to $22 billion, which is a 6.6% decrease in debt. So Procter & Gamble has handled this recession as you would hope that most companies would. They have been able to increase their revenues and profits a little bit over the past three years. Their cash holdings have gone down 16.5% as you would expect, but they’ve been smart enough to reduce their long term debt by 6.6%. So, to me, Procter & Gamble is being managed in a more fiscally responsible manner than Coca Cola.
We will look at the giant, Exxon, next.
