The Coca-Cola Company Reports 2010 First Quarter Financial Results
Today, our Company reports solid growth in the first quarter of 2010. We continued to win in the marketplace, gaining global value share and delivering volume and profit in line with our long-term targets, all while taking decisive action to strategically advance our North America business and further strengthen our franchise system in Europe.
-- Solid worldwide unit case volume growth of 3% in the quarter, in line
with our long-term volume target, and driven by international volume
growth of 5%.
-- First quarter reported EPS was $0.69, up 19%, with comparable EPS up 23%
to $0.80.
-- Reported operating income increased 17% in the quarter, and comparable
currency neutral operating income grew 9%.
-- Strong cash flow generation continued, with first quarter cash from
operations up 52% to $1.3 billion.
-- Gained global nonalcoholic ready-to-drink beverage value share and
maintained global volume share. International volume and value share
gains continued.
-- Integration planning for the Coca-Cola Enterprises deal strategically
advances and remains on track with an expected fourth quarter close.
-- Productivity initiatives are well on track to achieve goal of $500
million in annualized savings by year-end 2011.
ATLANTA--(BUSINESS WIRE)-- The Coca-Cola Company reports solid first quarter 2010 operating results, with unit case volume increasing a strong 3%, in line with our long-term volume target and underscoring the strength of our brands even as global macro economic challenges continue. We achieved broad-based international unit case volume growth of 5%. Eurasia and Africa unit case volume grew 11% with continued strong growth of 29% in India and 18% growth in Turkey. Pacific unit case volume grew 5%, cycling 4% in the prior year quarter, and Latin America unit case volume grew 4% with strong 12% growth in Brazil. Europe unit case volume was even with the prior year quarter, with growth in France and the Benelux countries as well as in our Bottling Investment territories including 5% growth in Germany and 2% growth in the Nordic Region. Growth continued in countries with per capita consumption of Company products less than 150 eight-ounce servings per year, with unit case volume up 10% in the quarter.
We gained global value share and maintained volume share in nonalcoholic ready-to-drink (NARTD) beverages and core sparkling beverages. We also realized volume and value share gains across juices and juice drinks, sports drinks, coffee and packaged water. Importantly, internationally we gained volume and value share in total NARTD beverages.
The continued power of the global "Open Happiness" campaign combined with the initial roll-out of our FIFA World Cup program and an increased focus on Coke with Meals drove growth in brand Coca-Cola, with unit case volume up 3% in the quarter. The strong brand Coca-Cola growth came from a diversity of global markets, including double-digit growth in India, Vietnam, the Philippines, Brazil, Russia and Egypt. During the quarter unit case volume for brand Coca-Cola grew over 1 million unit cases in 24 different countries. Total sparkling beverage unit case volume increased 2% in the quarter, with international sparkling beverage unit case volume increasing 3%. Total still beverage unit case volume increased 8% in the quarter, led by continued growth in juices and juice drinks, teas and water brands. Still beverage unit case volume increased 12% internationally.
Muhtar Kent, Chairman and Chief Executive Officer, The Coca-Cola Company said, "I am once again pleased with the results of the quarter as we continue to grow our dynamic global business. During the quarter we continued to achieve solid business results worldwide, all while taking decisive action to strategically advance our North America business and further strengthen our franchise system in Europe. Despite expected ongoing challenges in global economic conditions, we continue to invest in our business and build the health of our brands fueled by world-class marketing and innovation. This led to continued value share gains and strong and consistent cash flow.
"As we look ahead to the year 2020, we see tremendous growth opportunities for our franchise system and for the entire nonalcoholic ready-to-drink beverage industry. We are working closely with our bottling partners around the globe, leveraging our scale and the increased presence of our brands. We remain confident in our ability to deliver against our strategies while laying the foundation for consistent, profitable and sustainable long-term growth, inspired by our 2020 Vision in a growing world of refreshment."
FINANCIAL HIGHLIGHTS
-- First quarter 2010 reported net revenues increased 5%. Net revenues
increased 1% on a comparable currency neutral basis, reflecting a 2%
impact due to the deconsolidation of certain entities required by a
change in accounting guidance, as well as geographic mix.
-- First quarter 2010 reported operating income increased 17%, and
comparable currency neutral operating income increased 9%. This was
driven by a continued strong focus on cost management and the leveraging
of productivity initiatives as well as favorable timing of selling,
general and administrative expenses.
-- Cash from operations in the quarter increased 52% to $1.3 billion. There
were no share repurchases during the first quarter due to the pending
Coca-Cola Enterprises (CCE) transaction.
-- During the quarter, the Company announced its 48th consecutive annual
dividend increase, raising the quarterly dividend 7 percent from 41
cents to 44 cents per common share. This is equivalent to an annual
dividend of $1.76 per share, up from $1.64 per share in 2009.
OPERATING REVIEW
Three Months Ended April 2, 2010
% Favorable / (Unfavorable)
Comparable
Unit Case Operating
Net Revenues Currency Neutral
Volume Income
Operating Income
Total Company 3 5 17 9
Eurasia & Africa 11 21 23 10
Europe 0 7 3 1
Latin America 4 15 33 27
North America (2 ) (6 ) (1 ) (1 )
Pacific 5 5 5 (3 )
Bottling Investments 3 9 -- --
Eurasia and Africa
-- Our Eurasia and Africa Group's unit case volume increased 11% in the
quarter, cycling 3% growth in the prior year quarter. Net revenues for
the quarter increased 21%, reflecting a 13% increase in concentrate
sales and a 13% positive currency impact, partially offset by price/mix.
Reported operating income increased 23% in the quarter. Comparable
currency neutral operating income increased 10% in the quarter due to
the increase in concentrate sales, partially offset by increased World
Cup spending as well as country and product mix.
-- In Eurasia and Africa, sparkling beverages increased 9% and still
beverages increased 24% in the quarter, with brand Coca-Cola growing 8%.
The broad-based growth in unit case volume was led by a 29% increase in
India and share gains across key beverage categories in that market.
Turkey unit case volume was up 18% and Africa also reported strong unit
case volume growth in the quarter with the North and West Region growing
12% and the East and Central Region growing 9%. Russia unit case volume
was down 1%, with share gains in core sparkling beverages and showing
sequential unit case volume improvement on strong brand Coca-Cola
performance, up 12%.
Europe
-- Our Europe Group's unit case volume in the quarter was even, with
sequential improvement during the quarter. Net revenues for the quarter
increased 7%, primarily driven by positive price/mix of 2% and a 6%
positive currency impact, partially offset by a 2% decline in
concentrate sales. Reported operating income increased 3% in the quarter
and was impacted by certain one-time charges related to the recently
announced new organizational structure. Comparable currency neutral
operating income increased 1% on positive price/mix and continued
expense management.
-- Unit case volume in the quarter was positively impacted by growth in
France and the Benelux countries as well as in our Bottling Investments
territories with 5% growth in Germany and 2% growth in the Nordic
Region. Unit case volume for brand Coca-Cola and Coca-Cola Zero was up
1% and 7%, respectively, with core sparkling value share gains across
Europe. Volume results were impacted by continued softness in Spain and
the Adriatic and Balkans Region as challenging economic conditions
persist.
Latin America
-- Our Latin America Group delivered unit case volume growth of 4% in the
quarter, cycling 5% growth in the prior year quarter. Net revenues for
the quarter increased 15%, reflecting positive price/mix of 10% along
with 6% concentrate sales growth and a 9% positive currency impact,
partially offset by the impact of the deconsolidation of certain
entities due to a change in accounting guidance. Reported operating
income was up 33% in the quarter, with comparable currency neutral
operating income up 27%, primarily reflecting favorable volume and
pricing and continued management of expenses.
-- Solid unit case volume growth in the quarter was led by a 12% increase
in Brazil and a 10% increase in our Latin Center Region. Mexico unit
case volume was down 2% in the quarter due to unseasonably cold weather,
but showed sequential improvement during the quarter. Mexico continued
to gain share in total NARTD beverages as well as in the sparkling and
still beverage categories.
-- In the quarter, the Latin America Group gained volume and value share in
total NARTD beverages and across most key countries. In addition, the
group posted volume and value share gains in the sparkling beverage
category and volume share gains in the still beverage category. Brand
Coca-Cola unit case volume was up 5% in the quarter.
North America
-- Our North America Group's unit case volume declined 2% in a challenging
economic environment, combined with unseasonably cold weather in January
and February. Net revenues for the quarter decreased 6%, reflecting a 6%
decrease in concentrate sales and a 1% impact from price/mix, partially
offset by a 1% positive currency impact. Reported and comparable
currency neutral operating income decreased 1% in the quarter,
reflecting the impact of lower concentrate sales partially offset by
favorable timing of marketing expenses and lower cost of goods sold due
to business mix and lower input costs.
-- Unit case volume for sparkling beverages declined 1% in the quarter,
showing sequential improvement quarter on quarter and positively
impacted by strong marketing initiatives, including the Vancouver
Olympics and Super Bowl advertising. Brand Coca-Cola continued to
increase its favorite brand score advantage versus the competition among
the important teen and mom consumer segments. Coca-Cola Zero again
delivered double-digit unit case volume growth in the quarter, achieving
16 consecutive quarters of double-digit growth.
-- Still beverage unit case volume was down 2% in the quarter, as premium
still beverages continue to be impacted by economically pressured
consumers. In addition, the first quarter is cycling the shift of the
Rockstar energy drink business out of the Coca-Cola system. In the
quarter, North America held value share in still beverages with
expansion of Trademark Simply single-serve packaging in the cold drink
channel. Trademark Simply unit case volume grew 26% in the quarter.
Pacific
-- Our Pacific Group delivered unit case volume growth of 5% in the
quarter, cycling 4% growth in the prior year quarter. Net revenues for
the quarter increased 5%, primarily reflecting a 3% increase in
concentrate sales and a 6% positive currency impact, partially offset by
country and channel mix. Reported operating income increased 5% in the
quarter. Comparable currency neutral operating income decreased 3% in
the quarter, reflecting country and channel mix, primarily in Japan,
which also drove lower cost of sales.
-- Pacific Group unit case volume growth was led by China, Southeast and
West Asia, the Philippines and Korea. China volume grew 6% in the
quarter, following 29% growth in the fourth quarter which was led by
growth across our portfolio and new product launches. China juices and
juice drinks grew 16% in the quarter due to the continued strong
momentum of Minute Maid Pulpy and the continued expansion of Minute Maid
Pulpy Super Milky, launched in September 2009. China achieved volume and
value share gains in still beverages and the juices and juice drinks
category as a result.
-- In Japan, unit case volume declined 3% in the quarter, which is a
sequential improvement from the prior two quarters. While Japan
performance continues to be impacted by a weak economy and unfavorable
weather, we gained value share in total NARTD and still beverages with
volume and value share gains in the coffee, sports drinks and water
categories. Importantly, Coca-Cola Zero maintained its strong momentum
with unit case volume growth of 24% in the quarter, and I LOHAS natural
mineral water in the award winning eco-crush PET bottle performed
strongly in the competitive convenience store channel.
Bottling Investments
-- Our Bottling Investments Group's unit case volume increased 3% in the
quarter, driven by growth across most markets and especially in India,
the Philippines, China, Brazil and Germany, partially offset by the
impact of the deconsolidation of certain bottlers due to a change in
accounting guidance. On a comparable basis, excluding the impact of
deconsolidation, unit case volume increased 11%. Net revenues for the
quarter increased 9%, reflecting the 3% increase in unit case volume and
a high single-digit currency benefit, partially offset by country mix.
Reported operating income improved to $6 million in the first quarter
from a loss of $69 million in the prior year quarter, reflecting the
increase in revenues, the benefits of disciplined capital investments
and expense management, and the cycling of higher non-recurring items in
the prior year period.
FINANCIAL REVIEW
Net revenues for the quarter increased 5%, with comparable net revenues up 7%, reflecting a 2% impact due to the deconsolidation of certain entities required by a change in accounting guidance. Net revenues were further impacted by a 6% positive currency impact and a 3% increase in concentrate sales, partially offset by a 2% impact from price/mix. Net revenue was impacted during the quarter by geographic country mix as economic recovery in emerging markets continues to outpace the rest of the world. At the same time, we effectively executed our revenue growth management initiatives to realize positive pricing. This enabled us to grow global value share for the eleventh consecutive quarter while maintaining global volume share for the quarter.
Cost of goods sold decreased 2% in the quarter. After adjusting for items impacting comparability, currency neutral cost of goods sold decreased 3%, as a result of a shift in mix.
Selling, general and administrative (SG&A) expenses increased 3% in the quarter. After adjusting for items impacting comparability, SG&A expenses increased 5% in the quarter and decreased 1% on a currency neutral basis. This decrease was primarily driven by our continued benefits associated with our ongoing productivity initiatives as well as timing of marketing expenses.
Reported and comparable operating income both increased 17% in the quarter. Items impacting comparability reduced operating income by $96 million in 2010 and by $77 million in 2009. These items were primarily related to restructuring charges and costs related to global productivity initiatives. Currency positively impacted comparable operating income by 8% in the quarter. Comparable currency neutral operating income was up 9% in the quarter.
For the first quarter of 2010, our reported earnings per share were $0.69, an increase of 19%. Reported earnings per share for the first quarter of 2010 and 2009 included a net charge of $0.11 and $0.07 per share, respectively. The net charge in both years included restructuring charges and costs related to global productivity initiatives. The 2010 net charge also included the impact of the Venezuela currency devaluation. After considering these items impacting comparability, earnings per share for the quarter were $0.80, an increase of 23%. Earnings per share for the quarter were positively impacted by the relative weakness of the U.S. dollar versus other currencies around the world as compared to the prior year.
Cash from operations was $1.3 billion in the quarter compared with $0.9 billion in the prior year, an increase of 52%. This increase was primarily driven by our improved performance, including the effect of currency, and the cycling of higher than normal pension funding of $193 million in the prior year period.
Effective Tax Rate
The reported effective tax rate for the quarter was 25.4%. The underlying effective tax rate on operations for the quarter was 23.2%. The variance between the reported rate and the underlying rate was due to the tax impact of various separately disclosed items impacting comparability.
Our underlying effective tax rate does not reflect the impact of significant or unusual items and discrete events, which, if and when they occur, are separately recognized in the appropriate period.
Items Impacting Prior Year Results
First quarter 2009 results included a net charge of $0.07 per share primarily related to restructuring charges and asset write-downs.
NOTES
-- All references to growth rate percentages and share compare the results
of the period to those of the prior year comparable period. References
to cycling of growth rates compare the growth rate of the current period
to that of the prior year comparable period.
-- "Concentrate sales" represents the amount of concentrates, syrups,
beverage bases and powders sold by, or used in finished beverages sold
by, the Company to its bottling partners or other customers.
-- "Sparkling beverages" means nonalcoholic ready-to-drink beverages with
carbonation, including energy drinks and carbonated waters and flavored
waters.
-- "Still beverages" means nonalcoholic beverages without carbonation,
including noncarbonated waters, flavored waters and enhanced waters,
juices and juice drinks, teas, coffees and sports drinks.
-- All unit case volume percentage changes are computed based on average
daily sales for the first quarter. "Unit case" means a unit of
measurement equal to 24 eight-ounce servings of finished beverage, and
"unit case volume" means the number of unit cases (or unit case
equivalents) of Company beverages directly or indirectly sold by the
Company and its bottling partners to customers.
-- First quarter 2010 results were impacted by one fewer selling day, which
will be offset by the impact of one additional selling day in fourth
quarter 2010 results.
-- Comparable growth rates for first quarter 2010 reflect the impact of the
deconsolidation of certain entities required by a change in accounting
guidance.
-- Our long-term growth targets referenced in this release are on a
comparable currency neutral basis and exclude structural changes.
CONFERENCE CALL
We are hosting a conference call with investors and analysts to discuss our first quarter 2010 results today at 9:30 a.m. (EDT). We invite investors to listen to the live audiocast of the conference call at our website, http://www.thecoca-colacompany.com in the "Investors" section. A replay in downloadable MP3 format will also be available within 24 hours after the audiocast on our website. Further, the "Investors" section of our website includes a reconciliation of non-GAAP financial measures that may be used periodically by management when discussing our financial results with investors and analysts to our results as reported under GAAP.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
Three Months Ended
April 2, 2010 April 3, 2009 % Change
Net Operating Revenues $ 7,525 $ 7,169 5
Cost of goods sold 2,541 2,590 (2 )
Gross Profit 4,984 4,579 9
Selling, general and administrative 2,705 2,624 3
expenses
Other operating charges 96 92 --
Operating Income 2,183 1,863 17
Interest income 60 60 0
Interest expense 85 85 0
Equity income (loss) - net 136 17 700
Other income (loss) - net (115 ) (40 ) --
Income Before Income Taxes 2,179 1,815 20
Income taxes 553 456 21
Consolidated Net Income 1,626 1,359 20
Less: Net income attributable to 12 11 9
noncontrolling interests
Net Income Attributable to Shareowners $ 1,614 $ 1,348 20
of The Coca-Cola Company
Diluted Net Income Per Share* $ 0.69 $ 0.58 19
Average Shares Outstanding - Diluted* 2,327 2,319
* For the three months ended April 2, 2010 and April 3, 2009, "Basic Net
Income Per Share" was $0.70 for 2010 and $0.58 for 2009 based on "Average
Shares Outstanding - Basic" of 2,304 for 2010 and 2,313 for 2009. Basic net
income per share and diluted net income per share are calculated based on net
income attributable to shareowners of The Coca-Cola Company.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(UNAUDITED)
(In millions except par value)
April 2, 2010 December 31, 2009
Assets
Current Assets
Cash and cash equivalents $ 5,684 $ 7,021
Short-term investments 3,038 2,130
Total Cash, Cash Equivalents and Short-Term 8,722 9,151
Investments
Marketable securities 72 62
Trade accounts receivable, less allowances of 3,705 3,758
$44 and $55, respectively
Inventories 2,327 2,354
Prepaid expenses and other assets 2,382 2,226
Total Current Assets 17,208 17,551
Equity Method Investments 6,230 6,217
Other Investments, Principally Bottling 519 538
Companies
Other Assets 2,095 1,976
Property, Plant and Equipment - net 9,036 9,561
Trademarks With Indefinite Lives 6,261 6,183
Goodwill 3,905 4,224
Other Intangible Assets 2,149 2,421
Total Assets $ 47,403 $ 48,671
Liabilities and Equity
Current Liabilities
Accounts payable and accrued expenses $ 5,963 $ 6,657
Loans and notes payable 6,670 6,749
Current maturities of long-term debt 546 51
Accrued income taxes 404 264
Total Current Liabilities 13,583 13,721
Long-Term Debt 4,419 5,059
Other Liabilities 2,763 2,965
Deferred Income Taxes 1,481 1,580
The Coca-Cola Company Shareowners' Equity
Common stock, $0.25 par value; Authorized -
5,600 shares; Issued - 3,520 and 3,520 880 880
shares, respectively
Capital surplus 8,646 8,537
Reinvested earnings 42,136 41,537
Accumulated other comprehensive income (loss) (1,445 ) (757 )
Treasury stock, at cost - 1,214 and 1,217 (25,345 ) (25,398 )
shares, respectively
Equity Attributable to Shareowners of The 24,872 24,799
Coca-Cola Company
Equity Attributable to Noncontrolling 285 547
Interests
Total Equity 25,157 25,346
Total Liabilities and Equity $ 47,403 $ 48,671
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flow
(UNAUDITED)
(In millions)
Three Months Ended
April 2, 2010 April 3, 2009
Operating Activities
Consolidated net income $ 1,626 $ 1,359
Depreciation and amortization 295 283
Stock-based compensation expense 53 53
Deferred income taxes 34 (20 )
Equity income or loss, net of dividends (118 ) (3 )
Foreign currency adjustments 93 42
Gains on sales of assets, including bottling (14 ) (5 )
interests
Other operating charges 71 74
Other items 73 100
Net change in operating assets and liabilities (787 ) (1,010 )
Net cash provided by operating activities 1,326 873
Investing Activities
Acquisitions and investments, principally (6 ) (179 )
beverage and bottling companies and trademarks
Purchases of other investments (915 ) (6 )
Proceeds from disposals of bottling companies 14 37
and other investments
Purchases of property, plant and equipment (393 ) (467 )
Proceeds from disposals of property, plant and 16 7
equipment
Other investing activities (84 ) 9
Net cash provided by (used in) investing (1,368 ) (599 )
activities
Financing Activities
Issuances of debt 2,773 5,758
Payments of debt (2,922 ) (3,001 )
Issuances of stock 123 10
Purchases of stock for treasury (2 ) -
Dividends (1,015 ) (950 )
Net cash provided by (used in) financing (1,043 ) 1,817
activities
Effect of Exchange Rate Changes on Cash (252 ) 24
and Cash Equivalents
Cash and Cash Equivalents
Net increase (decrease) during the period (1,337 ) 2,115
Balance at beginning of period 7,021 4,701
Balance at end of period $ 5,684 $ 6,816
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Three Months Ended
Net Operating Revenues Operating Income (Loss) Income (Loss) Before Income
Taxes
April 2, April 3, April 2, April 3, April 2, April 3,
2010 2009 % Fav. / 2010 2009 % Fav. / 2010 2009 % Fav. /
(1) (6) (Unfav.) (2) (7) (Unfav.) (2),(3), (7),(8), (Unfav.)
(4),(5) (9)
Eurasia & $ 611 $ 503 21 $ 254 $ 207 23 $ 258 $ 202 28
Africa
Europe 1,262 1,180 7 712 692 3 722 697 4
Latin 985 860 15 602 454 33 608 457 33
America
North 1,932 2,056 (6 ) 425 428 (1 ) 424 426 0
America
Pacific 1,202 1,140 5 480 456 5 477 453 5
Bottling 1,977 1,822 9 6 (69 ) -- 110 (43 ) --
Investments
Corporate 18 17 6 (296 ) (305 ) 3 (420 ) (377 ) (11 )
Eliminations (462 ) (409 ) -- -- -- -- -- -- --
Consolidated $ 7,525 $ 7,169 5 $ 2,183 $ 1,863 17 $ 2,179 $ 1,815 20
Intersegment revenues for the three months ended April 2, 2010, were approximately $36 million for
(1) Eurasia and Africa, $228 million for Europe, $54 million for Latin America, $15 million for North
America, $104 million for Pacific and $25 million for Bottling Investments.
Operating income (loss) and income (loss) before income taxes for the three months ended April 2, 2010,
were reduced by approximately $1 million for Eurasia and Africa, $28 million for Europe, $4 million for
(2) North America, $33 million for Bottling Investments and $30 million for Corporate, primarily due to the
Company's ongoing productivity initiatives, restructuring charges and deal costs incurred in connection
with our definitive agreements to acquire the assets and liabilities of CCE's North American operations
and to sell our Norwegian and Swedish bottling operations to CCE.
Income (loss) before income taxes for the three months ended April 2, 2010, was reduced by approximately
(3) $29 million for Bottling Investments, primarily attributable to the Company's proportionate share of
asset impairment charges and restructuring costs recorded by equity method investees.
Income (loss) before income taxes for the three months ended April 2, 2010, was reduced by approximately
(4) $103 million for Corporate due to the remeasurement of our Venezuelan subsidiary's net assets.
Subsequent to December 31, 2009, the Venezuelan government announced a currency devaluation, and
Venezuela was determined to be a hyperinflationary economy.
Income (loss) before income taxes for the three months ended April 2, 2010, was reduced by approximately
(5) $23 million for Bottling Investments and $3 million for Corporate, primarily due to other-than-temporary
impairments of available-for-sale securities.
Intersegment revenues for the three months ended April 3, 2009, were approximately $45 million for
(6) Eurasia and Africa, $200 million for Europe, $32 million for Latin America, $12 million for North
America, $94 million for Pacific and $26 million for Bottling Investments.
Operating income (loss) and income (loss) before income taxes for the three months ended April 3, 2009,
(7) were reduced by approximately $5 million for North America, $65 million for Bottling Investments and $22
million for Corporate, primarily as a result of restructuring costs, productivity initiatives and an
asset impairment.
Income (loss) before income taxes for the three months ended April 3, 2009, was reduced by approximately
(8) $51 million for Bottling Investments and $1 million for Corporate, primarily attributable to the
Company's proportionate share of asset impairment charges and restructuring costs recorded by equity
method investees.
(9) Income (loss) before income taxes for the three months ended April 3, 2009, was reduced by approximately
$27 million for Corporate due to an other-than-temporary impairment of a cost method investment.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Financial Measures
(UNAUDITED)
(In millions except per share data)
Three Months Ended April 2, 2010
Items Impacting Comparability
% Change -
After % Change
Asset Certain - After
Reported Impairments/ Productivity Equity CCE Tax Considering
Other Items Reported Considering
(GAAP) Restructuring Initiatives Investees Transaction Matters Items
(GAAP) Items
(Non-GAAP)
(Non-GAAP)
Net Operating $ 7,525 $ 7,525 5 7 (1)
Revenues
Cost of goods 2,541 2,541 (2 ) 2 (2)
sold
Gross Profit 4,984 4,984 9 10 (3),
(6)
Selling,
general and 2,705 2,705 3 5 (4)
administrative
expenses
Other
operating 96 ($40 ) ($50 ) ($6 ) - -- --
charges
Operating 2,183 40 50 6 2,279 17 17 (5),
Income (6)
Interest 60 60 0 3
income
Interest 85 85 0 5
expense
Equity income 136 $ 29 165 700 104
(loss) - net
Other income (115 ) 26 $ 103 14 -- --
(loss) - net
Income Before 2,179 66 50 29 6 103 2,433 20 23
Income Taxes
Income taxes 553 2 16 4 2 ($13 ) 564 21 22
Consolidated 1,626 64 34 25 4 13 103 1,869 20 23
Net Income
Less: Net
income
attributable 12 12 9 33
to
noncontrolling
interests
Net Income
Attributable
to Shareowners $ 1,614 $ 64 $ 34 $ 25 $ 4 $ 13 $ 103 $ 1,857 20 23
of The
Coca-Cola
Company
Diluted Net
Income Per $ 0.69 $ 0.03 $ 0.01 $ 0.01 $ 0.00 $ 0.01 $ 0.04 $ 0.80 (7) 19 23
Share
Average Shares
Outstanding - 2,327 2,327 2,327 2,327 2,327 2,327 2,327 2,327
Diluted
Gross Margin 66.2 % 66.2 %
Operating 29.0 % 30.3 %
Margin
Effective Tax 25.4 % 23.2 %
Rate
Three Months Ended April 3, 2009
Items Impacting Comparability
After
Asset Accounting
Reported Impairments/ Productivity Equity Certain Tax Considering
Guidance
(GAAP) Restructuring Initiatives Investees Matters Items
Changes
(Non-GAAP)
Net Operating $ 7,169 ($151 ) $ 7,018
Revenues
Cost of goods 2,590 (96 ) 2,494
sold
Gross Profit 4,579 (55 ) 4,524
Selling,
general and 2,624 (40 ) 2,584
administrative
expenses
Other
operating 92 ($75 ) ($17 ) -
charges
Operating 1,863 75 17 (15 ) 1,940
Income
Interest 60 (2 ) 58
income
Interest 85 (4 ) 81
expense
Equity income 17 $ 52 12 81
(loss) - net
Other income (40 ) 27 (4 ) (17 )
(loss) - net
Income Before 1,815 102 17 52 (5 ) 1,981
Income Taxes
Income taxes 456 3 6 13 ($14 ) (3 ) 461
Consolidated 1,359 99 11 39 14 (2 ) 1,520
Net Income
Less: Net
income
attributable 11 (2 ) 9
to
noncontrolling
interests
Net Income
Attributable
to Shareowners $ 1,348 $ 99 $ 11 $ 39 $ 14 $ 0 $ 1,511
of The
Coca-Cola
Company
Diluted Net
Income Per $ 0.58 $ 0.04 $ 0.00 $ 0.02 $ 0.01 $ 0.00 $ 0.65
Share
Average Shares
Outstanding - 2,319 2,319 2,319 2,319 2,319 2,319 2,319
Diluted
Gross Margin 63.9 % 64.5 %
Operating 26.0 % 27.6 %
Margin
Effective Tax 25.1 % 23.3 % (8)
Rate
Notes:
Items to consider for comparability include primarily charges, gains, and accounting changes. Charges and accounting changes negatively
impacting net income are reflected as increases to reported net income. Gains and accounting changes positively impacting net income are
reflected as deductions to reported net income.
The currency impact is equal to the difference between current year U.S. dollar amounts at current year exchange rates compared to current
year U.S. dollar amounts recalculated using prior year comparable period exchange rates. In all cases, the exchange rates include the impact
of hedging in the applicable periods.
(1)
Reported net operating revenue growth includes a negative impact of $151, or approximately 2%, due to items impacting comparability, which
includes the effects of accounting guidance changes that are structural in nature. Net operating revenue growth after considering items
impacting comparability for the three months ended April 2, 2010 includes a positive currency impact of approximately 6%. Currency neutral
net operating revenue growth after considering items impacting comparability is 1%.
(2)
Cost of goods sold after considering items impacting comparability for the three months ended April 2, 2010 includes a positive currency
impact of approximately 5%. Currency neutral cost of goods sold after considering items impacting comparability decreased 3%.
(3)
Gross profit after considering items impacting comparability for the three months ended April 2, 2010 includes a positive currency impact of
approximately 7%. Currency neutral gross profit growth after considering items impacting comparability is 3%.
(4)
Selling, general and administrative expenses after considering items impacting comparability for the three months ended April 2, 2010 include
a positive currency impact of approximately 5%. Currency neutral selling, general and administrative expenses after considering items
impacting comparability decreased 1%. Items do not add due to rounding.
(5)
Operating income after considering items impacting comparability for the three months ended April 2, 2010 includes a positive currency impact
of approximately 8%. Currency neutral operating income growth after considering items impacting comparability is 9%.
(6)
Currency neutral operating expense leverage after considering items impacting comparability for the three months ended April 2, 2010 is
positive 6%, which is calculated by subtracting currency neutral gross profit growth after considering items impacting comparability of 3%
from currency neutral operating income growth after considering items impacting comparability of 9%.
(7) Per share amounts do not add due to rounding.
Effective tax rate after
(8) considering impact of net income 2009
attributable to noncontrolling
interests:
Income before income taxes of
$1,981 less net income $ 1,972
attributable to noncontrolling
interests of $9
Income taxes $ 461
Effective tax rate after
considering impact of net income 23.4 %
attributable to noncontrolling
interests
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that
certain non-GAAP financial measures used in managing the business may provide users of this financial information additional meaningful comparisons
between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional
meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items
that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and planning decisions
and in evaluating the Company's performance. See the tables above for supplemental financial data and corresponding reconciliations to GAAP
financial measures for the three months ended April 2, 2010 and April 3, 2009. Non-GAAP financial measures should be viewed in addition to, and not
as an alternative for, the Company's reported results prepared in accordance with GAAP.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Financial Measures
Operating Income (Loss) by Segment
(UNAUDITED)
(In millions)
Three Months Ended April 2, 2010 Three Months Ended April 3, 2009
Items Impacting Comparability Items Impacting Comparability
% Favorable
(Unfavorable)
After After % Favorable
Asset Asset Accounting - After
Reported Impairments/ Productivity CCE Considering Reported Impairments/ Productivity Considering (Unfavorable)
Guidance Considering
(GAAP) Restructuring Initiatives Transaction Items (GAAP) Restructuring Initiatives Items - Reported
Changes Items
(Non-GAAP) (Non-GAAP) (GAAP)
(Non-GAAP)
(1)
Eurasia & $ 254 $ 1 $ 255 $ 207 $ 207 23 23
Africa
Europe 712 28 740 692 ($1 ) 691 3 7
Latin 602 602 454 (12 ) 442 33 36
America
North 425 $ 3 1 429 428 $ 5 3 436 (1 ) (2 )
America
Pacific 480 480 456 (3 ) 453 5 6
Bottling 6 33 39 (69 ) 65 (4 ) (8 ) -- --
Investments
Corporate (296 ) 4 20 $ 6 (266 ) (305 ) 5 $ 17 2 (281 ) 3 5
Consolidated $ 2,183 $ 40 $ 50 $ 6 $ 2,279 $ 1,863 $ 75 $ 17 ($15 ) $ 1,940 17 17
Note: The currency impact is equal to the difference between current year U.S. dollar amounts at current year exchange rates compared to current year U.S. dollar amounts
recalculated using prior year comparable period exchange rates. In all cases, the exchange rates include the impact of hedging in the applicable periods.
(1) Currency neutral operating income growth after considering items impacting comparability for each operating segment is calculated as follows:
% Favorable
% Favorable
% Currency (Unfavorable)
(Unfavorable) -
Impact After
- After Currency
Considering
Considering Neutral After
Items
Items Impacting Considering
(Non-GAAP) Comparability Items
(Non-GAAP)
Eurasia & 23 13 10
Africa
Europe 7 6 1
Latin 36 9 27
America
North (2 ) (1 ) (1 )
America
Pacific 6 9 (3 )
Bottling -- -- --
Investments
Corporate 5 3 2
Consolidated 17 8 9
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial
measures used in managing the business may provide users of this financial information additional meaningful comparisons between current results and results in prior operating
periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a
comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making
financial, operating and planning decisions and in evaluating the Company's performance. See the tables above for supplemental financial data and corresponding reconciliations to
GAAP financial measures for the three months ended April 2, 2010 and April 3, 2009. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for,
the Company's reported results prepared in accordance with GAAP.
The Coca-Cola Company
The Coca-Cola Company (NYSE: KO) is the world's largest beverage company, refreshing consumers with more than 500 sparkling and still brands. Along with Coca-Cola, recognized as the world's most valuable brand, the Company's portfolio includes 12 other billion dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply and Georgia Coffee. Globally, we are the No. 1 provider of sparkling beverages, juices and juice drinks and ready-to-drink teas and coffees. Through the world's largest beverage distribution system, consumers in more than 200 countries enjoy the Company's beverages at a rate of 1.6 billion servings a day. With an enduring commitment to building sustainable communities, our Company is focused on initiatives that protect the environment, conserve resources and enhance the economic development of the communities where we operate. For more information about our Company, please visit our website at www.thecoca-colacompany.com.
Forward-Looking Statements
This press release may contain statements, estimates or projections that constitute "forward-looking statements" as defined under U.S. federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Coca-Cola Company's historical experience and our present expectations or projections. These risks include, but are not limited to, obesity and other health concerns; scarcity and quality of water; changes in the nonalcoholic beverages business environment, including changes in consumer preferences based on health and nutrition considerations and obesity concerns; shifting consumer tastes and needs, changes in lifestyles and competitive product and pricing pressures; impact of the global credit crisis on our liquidity and financial performance; our ability to expand our operations in developing and emerging markets; foreign currency exchange rate fluctuations; increases in interest rates; our ability to maintain good relationships with our bottling partners; the financial condition of our bottling partners; our ability and the ability of our bottling partners to maintain good labor relations, including the ability to renew collective bargaining agreements on satisfactory terms and avoid strikes, work stoppages or labor unrest; increase in the cost, disruption of supply or shortage of energy; increase in cost, disruption of supply or shortage of ingredients or packaging materials; changes in laws and regulations relating to beverage containers and packaging, including container deposit, recycling, eco-tax and/or product stewardship laws or regulations; adoption of significant additional labeling or warning requirements; unfavorable general economic conditions in the United States or other major markets; unfavorable economic and political conditions in international markets, including civil unrest and product boycotts; changes in commercial or market practices and business model within the European Union; litigation uncertainties; adverse weather conditions; our ability to maintain brand image and corporate reputation as well as other product issues such as product recalls; changes in legal and regulatory environments; changes in accounting standards and taxation requirements; our ability to achieve overall long-term goals; our ability to protect our information systems; additional impairment charges; our ability to successfully manage Company-owned bottling operations; the impact of climate change on our business; global or regional catastrophic events; and other risks discussed in our Company's filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.
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Source: The Coca-Cola Company
Released April 20, 2010