Coca-Cola Enterprises shifting cash-usage strategy away from debt reduction, eyes stock purchases

By Jennifer Lanning Drey

Portland, Ore., Dec. 17 - Coca-Cola Enterprises Inc. has shifted its strategy on free cash flow usage to include a greater emphasis on returning funds to shareholders after reducing total debt to $8.7 billion through its previous focus on debt reduction, Bill Douglas, chief financial officer of Coca-Cola Enterprises, said during a company conference call held Thursday.

"With excellent results in 2009, a solid outlook for 2010 and a strong balance sheet, we are now well positioned to diversify our use of cash and begin to return additional funds to shareowners," Douglas said.

Coca-Cola Enterprises expects current cash on hand, coupled with anticipated free cash flow over the next three years, to provide more than $3 billion in available cash that can be used for a combination of share repurchases, debt reduction, increased dividends and potential acquisitions, Douglas said.

The company announced Thursday that it will begin a share repurchase program in the first quarter through which it plans to repurchase approximately $600 million of its stock in 2010.

In addition, the company intends to begin consistently increasing its dividend in 2010, Douglas said.

New debt ratio target

Also during Thursday's call, Douglas said that as part of a recent review of its capital structure, the company has established a new long-term target of maintaining net debt to EBITDA in a range of 2.5 to 3.0 times.

"This target is intended as a long-term guideline and may fluctuate given business needs or in the case of potential acquisitions," Douglas said.

He later noted that the company expects to end 2009 in the top range of the net-debt-to-EBITDA target.

For full-year 2009, Coca-Cola Enterprises expects free cash flow of approximately $850 million, net of an additional pension contribution of $150 million in the fourth quarter.

"We have achieved this level of free cash flow through a combination of solid operating income improvement, a favorable interest environment, as well as benefits from the timing of working capital," he said.

The company expects free cash flow of approximately $800 million in 2010.

Atlanta-based Coca-Cola Enterprises is a bottler and distributor of Coca-Cola products.

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