The Coca-Cola Company Reports Second Quarter and Half Year 2008 Results
-- Second quarter EPS of $0.61; and $1.01 after considering items impacting comparability, an increase of 19 percent.
-- Second quarter net revenue growth of 17 percent.
-- Worldwide unit case volume increased 3 percent in the quarter, led by 5 percent growth in International while maintaining unit case volume in North America in a difficult operating environment.
-- Operating income up 18 percent on a reported basis in the quarter; increased 20 percent after considering items impacting comparability.
-- $400 to $500 million of annualized savings targeted by year-end 2011 from productivity initiatives.
ATLANTA--(BUSINESS WIRE)--
The Coca-Cola Company today reported second quarter earnings per share of $0.61, a decrease of 24 percent versus the prior year on a reported basis, and $1.01 after considering items impacting comparability, an increase of 19 percent. Earnings per share for the quarter included a net charge of $0.40 per share primarily related to a non-cash impairment charge at Coca-Cola Enterprises Inc. ("CCE"), an equity investee. Earnings per share for the second quarter of 2007 were $0.80 and included a net charge of $0.05 per share, primarily related to restructuring charges and a non-cash impairment charge at an equity investee.
"Our results in the quarter underscore our ability to continue delivering volume growth and double-digit comparable earnings per share growth, despite the combined impacts of several one-off events and a more challenging economic environment," said Neville Isdell, chairman of the Board, The Coca-Cola Company. "We continue to manage the business for the long term by investing in brand building and innovation with an unrelenting focus on improving our effectiveness and efficiency. We have made significant progress since the turnaround began in 2004 and I am confident going forward under Muhtar's leadership that the business will continue to be managed by investing for long-term sustainable growth and value."
President and Chief Executive Officer Muhtar Kent said, "Our second quarter performance demonstrates our ability to leverage the strengths of our system to achieve balanced growth. Our results were once again led by our international operations, which delivered 5 percent unit case volume growth, and we maintained volume in North America despite significant challenges. Latin America continues to be a key contributor to our results, along with solid performance in many of our emerging markets including China, Turkey, India, Eastern Europe, Southern Eurasia, North and West Africa and the Middle East. We have accelerated our global volume and value share gains as consumers connect with our brands and our system executes in the marketplace.
"We are clearly operating in a more challenging macroeconomic environment. A strength of our system is the ability to work with our bottling partners and customers to understand the local factors impacting consumer behavior, adjust our plans where appropriate, while continuing to invest and build share for the long term. Both the fundamentals of our business and the strength of our brands remain solid. Through our focus on superior execution and driving productivity, I remain confident we are building a stronger Coca-Cola system for the future."
(All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.)
Financial Highlights
-- Second quarter net operating revenues increased 17 percent.
Revenue growth reflected a 3 percent increase in concentrate
sales, a 2 percent increase from structural changes primarily
resulting from acquisitions of certain bottlers, a 3 percent
benefit from pricing and mix and a 9 percent positive currency
impact.
-- Operating income in the quarter increased 18 percent on a
reported basis and 20 percent after considering items
impacting comparability. Items impacting comparability
negatively affected second quarter pre-tax operating income by
$97 million in 2008 and by $48 million in 2007. Currency
benefited operating income in the quarter by 11 percent.
-- Year-to-date, the Company repurchased $1.0 billion of its
stock and intends to repurchase a total of $1.75 to $2.0
billion of its stock for the full year.
-- The Company is targeting $400 to $500 million in annualized
savings from productivity initiatives by year-end 2011 to
provide additional flexibility to invest for growth.
Operational Highlights
(All references to unit case volume percentage changes in this section are computed based on average daily sales.)
Total Company
-- Unit case volume increased 3 percent in the second quarter and
4 percent year-to-date, successfully cycling 6 percent growth
in the prior year quarter and year-to-date periods.
Acquisitions contributed 1 point of unit case volume growth
for both the quarter and year-to-date.
-- International operations delivered 5 percent unit case volume
growth in the quarter, successfully cycling 9 percent growth
from the prior year quarter. Solid growth across Latin America
and in key emerging markets including China, Turkey, India,
Eastern Europe, Southern Eurasia, North and West Africa and
the Middle East continued to drive the results. North America
unit case volume was even in the quarter, while unit case
volume in Japan and the European Union Group were each down 1
percent.
-- The Company continued to achieve growth in sparkling
beverages, which increased unit case volume 1 percent in the
quarter. Trademark Coca-Cola unit case volume was slightly
positive in the quarter and Trademarks Fanta and Sprite
increased unit case volume 1 percent and 3 percent,
respectively.
-- Still beverage unit case volume increased 13 percent in the
quarter, led by strong growth across the Company's still brand
portfolio, including juice and juice drink brands, tea brands
and water brands.
-- Globally, the Company gained volume and value share in
nonalcoholic ready-to-drink beverages as well as in sparkling
beverages and key still beverage categories including bottled
water and juice and juice drinks.
Africa
--------------
Percent Change
From Prior Year
----------------------------------
Second Year-
Quarter To-Date
-------------- --------------
Unit Case Volume 5% 2%
Net Revenues 6% 4%
Operating Income 61% 32%
-- The Africa Group's unit case volume increased 5 percent in the
quarter, with most key markets contributing to growth. South
Africa's unit case volume was even in the quarter, cycling 12
percent growth from the prior year and reflecting the
lingering effects of carbon dioxide shortages. Nigeria unit
case volume increased 4 percent in the quarter. Net revenues
for the quarter increased 6 percent, reflecting a 2 percent
increase in concentrate sales, positive pricing and mix and a
slight negative currency impact. Operating income increased 61
percent in the quarter reflecting the increase in net
revenues, effective management of operating expenses and the
cycling of restructuring charges in the prior year quarter,
partially offset by the continued investment in key marketing
initiatives.
Eurasia
--------------
Percent Change
From Prior Year
----------------------------------
Second Year-
Quarter To-Date
-------------- --------------
Unit Case Volume 7% 9%
Net Revenues 30% 37%
Operating Income 21% 37%
-- The Eurasia Group's unit case volume increased 7 percent in
the quarter, successfully cycling 15 percent growth in the
prior year quarter. Solid unit case volume growth in India,
Turkey, the Middle East, Eastern Europe and Southern Eurasia
drove the results. Russia's unit case volume increased 2
percent in the quarter, primarily reflecting the impact from
adverse weather conditions late in the quarter, and resulted
in volume and value share gains in nonalcoholic ready-to-drink
beverages. Net revenues for the quarter increased 30 percent,
benefiting from a 13 percent increase in concentrate sales,
positive pricing and mix and a high single-digit currency
benefit. Operating income growth in the quarter of 21 percent
reflected the benefit of the net revenue increase and the
continued investment in key business initiatives.
European Union
--------------
Percent Change
From Prior Year
----------------------------------
Second Year-
Quarter To-Date
-------------- --------------
Unit Case Volume (1%) 1%
Net Revenues 13% 15%
Operating Income 16% 15%
-- Unit case volume in the European Union Group declined 1
percent in the quarter, cycling 5 percent growth from the
prior year. The group gained volume and value share in
nonalcoholic ready-to-drink beverages as well as in sparkling
beverages and key still beverage categories in the quarter.
Unit case volume results in the quarter were negatively
impacted by labor strikes in several key markets, the shift of
Easter into the first quarter as well as unfavorable weather
early in the quarter. Net revenues for the quarter increased
13 percent, reflecting a 2 percent decrease in concentrate
sales, positive pricing and mix and a low double-digit
currency benefit. Operating income increased 16 percent in the
quarter primarily reflecting the higher net revenues while
continuing to invest behind key marketing initiatives across
the group.
Latin America
--------------
Percent Change
From Prior Year
----------------------------------
Second Year-
Quarter To-Date
-------------- --------------
Unit Case Volume 7% 8%
Net Revenues 23% 24%
Operating Income 29% 25%
-- The Latin America Group continued to deliver strong unit case
volume growth of 7 percent in the quarter, successfully
cycling 9 percent growth in the prior year quarter. Solid unit
case volume growth across the group and the benefit of
acquisitions drove the results for the quarter and led to
volume and value share gains in both sparkling and still
beverages. Net revenues increased 23 percent in the quarter,
reflecting a 5 percent increase in concentrate sales, positive
pricing and mix and a low double-digit currency benefit.
Operating income increased 29 percent in the quarter,
reflecting the net revenue increase while continuing to invest
in key marketing initiatives.
-- In Mexico, unit case volume increased 10 percent in the
quarter. The growth was led by brand Coca-Cola, which
increased unit case volume 3 percent and the successful
integration of Jugos del Valle, which contributed 3 points of
the overall unit case growth. Strong performance in sparkling
and still beverages led to share gains in sparkling beverages,
energy drinks, packaged water, juices and sports drinks.
-- In Brazil, unit case volume growth for the quarter was 1
percent, successfully cycling 22 percent growth in the prior
year. Performance in the quarter was impacted by a volume
decline in April resulting from a slowdown in industry growth
as consumers used the availability of credit to drive durable
goods growth. Trademark Coca-Cola unit case volume increased 1
percent in the quarter, and both sparkling and still beverages
gained volume and value share in the quarter.
-- In Argentina, strong sparkling beverage growth, led by
Trademark Coca-Cola, contributed to unit case volume growth of
7 percent in the quarter, successfully cycling 7 percent
growth in the prior year quarter and driving sparkling
beverage share gains.
North America
--------------
Percent Change
From Prior Year
----------------------------------
Second Year-
Quarter To-Date
-------------- --------------
Unit Case Volume Even Even
Net Revenues 8% 10%
Operating Income (9%) (8%)
-- Unit case volume in the North America Group was even in the
quarter, reflecting a continued difficult U.S. economic
environment and a shift in the impact of holidays out of the
second quarter. Retail unit case volume increased 1 percent,
including a benefit from acquisitions, and Foodservice and
Hospitality declined 3 percent, reflecting the continued
challenging foodservice industry environment. Net revenues for
the quarter increased 8 percent, reflecting a 3 percent
decrease in concentrate sales, positive pricing and mix of
finished goods businesses and an increase from acquisitions.
Operating income decreased 9 percent in the quarter reflecting
the growth in net revenues, including the benefit of
acquisitions, offset by higher input costs in the finished
goods businesses, unfavorable mix and continued investment in
key business initiatives.
-- Sparkling beverage unit case volume declined 4 percent in the
quarter, primarily reflecting the decline in foodservice and
other on-premise businesses. The continued successful
execution of the three-cola strategy resulted in Coca-Cola
Classic, Diet Coke and Coca-Cola Zero combined gaining volume
and value share in the U.S. Coca-Cola Zero continued to
deliver strong performance, increasing unit case volume more
than 40 percent in the quarter, cycling strong double-digit
growth in the prior year quarter.
-- Still beverage unit case volume increased 9 percent in the
quarter and achieved volume and value share gains, reflecting
the continued strong performance of glaceau and Fuze as well
as strong growth in juices and juice drinks. The growth in
juices and juice drinks was led by double-digit unit case
volume growth of warehouse-delivered juices, which continued
to gain volume and value share, reflecting the success of
Trademark Simply and Minute Maid Enhanced Juices.
Pacific
--------------
Percent Change
From Prior Year
----------------------------------
Second Year-
Quarter To-Date
-------------- --------------
Unit Case Volume 4% 7%
Net Revenues 13% 10%
Operating Income 19% 13%
-- The Pacific Group increased unit case volume 4 percent in the
quarter, cycling 9 percent growth in the prior year quarter,
and reflected the impact from natural disasters and
unfavorable weather. Net revenues increased 13 percent,
reflecting a 3 percent increase in concentrate sales, positive
pricing and a low-teens currency benefit, partially offset by
unfavorable country mix. Operating income increased 19 percent
reflecting the increase in net revenues while investing in key
business initiatives, including the Olympics activation.
-- In Japan, unit case volume declined 1 percent in the quarter,
cycling 4 percent growth in the prior year quarter, while
achieving share gains in nonalcoholic ready-to-drink
beverages. Trademark Coca-Cola continued to deliver unit case
volume growth driven by the success of Coca-Cola Zero and the
execution of the three-cola strategy. Georgia Coffee unit case
volume increased 4 percent in the quarter and 3 percent
year-to-date, its third consecutive quarter of growth and its
highest growth rate in more than 5 years. Volume declines in
Sokenbicha and Aquarius reflected unfavorable weather late in
the quarter. Our outlook for Japan remains positive reflecting
initiatives to stabilize and return the business to
sustainable growth.
-- In China, despite being impacted by earthquakes and flooding
across various regions, unit case volume increased 13 percent
in the quarter led by strong growth in Trademark Coca-Cola,
Trademark Sprite and Minute Maid. The strong performance
across the brands resulted in share gains in both sparkling
and still beverages. Olympic activation through innovative
consumer and customer marketing continues with The Coca-Cola
Company recently being recognized as the most effective
sponsor of the Olympics in China.
-- In the Philippines, unit case volume increased 3 percent in
the quarter, cycling 11 percent growth in the prior year
quarter. While unit case volume was negatively impacted
primarily by poor weather conditions in the quarter as well as
pressure from the impact of food inflation on consumer
discretionary spending, the performance reflected volume and
value share gains in nonalcoholic ready-to-drink beverages and
in sparkling beverages.
Bottling Investments
--------------------
Percent Change
From Prior Year
-------------------------------
Second Year-
Quarter To-Date
-------------- --------------
Unit Case Volume 16% 26%
Net Revenues 30% 36%
Operating Income 108% 137%
-- The Bottling Investments Group's unit case volume increased 16
percent in the quarter, reflecting unit case volume growth
across the group as well as a benefit from the acquisitions of
certain bottlers in the prior year. Net revenues increased 30
percent in the quarter as a result of the unit case volume
increase, the acquisition of certain bottlers and a mid-teens
currency benefit. Operating income more than doubled in the
quarter due to the increase in net revenues, the cycling of
restructuring charges in the prior year quarter and the
continued focus on driving sustained financial performance
through investments in market execution capabilities, enhanced
supply chain efficiencies and controlled operating expenses.
Financial Review
Operating Results
Net operating revenues for the quarter increased 17 percent, reflecting a 3 percent increase in concentrate sales, a 2 percent increase from structural changes resulting primarily from acquisitions of certain bottlers, a 3 percent benefit from pricing and mix and a 9 percent positive currency impact.
Cost of goods sold increased 16 percent for the quarter, reflecting a 3 percent increase in concentrate sales, a 2 percent increase from structural changes resulting primarily from acquisitions of certain bottlers, an 8 percent increase from currency and increases in commodity-based input and freight costs.
Selling, general and administrative expenses for the quarter increased 16 percent, with structural changes primarily related to bottler acquisitions, increased costs from brand acquisitions and currency increasing selling, general and administrative expenses by 14 percent. The Company continued to achieve expense leverage through investing in marketing to support brand growth while effectively managing general and administrative expenses through productivity initiatives.
The Company had other operating charges in the quarter of $97 million related to restructuring charges, contract termination costs and asset write-downs.
Operating income for the quarter increased 18 percent, reflecting the growth in gross profit, the investments in marketing and increased sales and service expenses. After considering items impacting comparability, operating income increased 20 percent. Currency increased operating income in the quarter by 11 percent. Based on current expectations of market rates for the remainder of the year and benefits of hedging coverage in place, the Company currently expects a favorable currency impact on 2008 operating income of at least mid-single digits.
Equity income declined in the quarter primarily as a result of our proportionate share of the non-cash impairment charge recorded by CCE.
In the quarter, the Company recorded gains on the sales of assets of $102 million primarily related to the sale of a Brazilian bottler to Coca-Cola FEMSA, S.A.B. de C.V.
Effective Tax Rate
The reported effective tax rate for the quarter was 25.0 percent and the underlying effective tax rate on operations for the quarter was 22.0 percent. The variance between the reported rate and the underlying rate was due to the tax impact of various separately disclosed items impacting comparability.
The Company anticipates that its underlying effective tax rate on operations for the full year 2008 will be 22.0 percent. The Company's estimated underlying effective tax rate does not reflect the impact of discrete events, which, if and when they occur, are separately recognized in the appropriate period.
Productivity Savings
The Company is targeting $400 to $500 million in annualized savings from productivity initiatives by year-end 2011 to provide additional flexibility to invest for growth. The savings are expected to be generated in a number of areas, including aggressively managing operating expenses supported by lean techniques, redesigning key processes to drive standardization and effectiveness, better leveraging our size and scale, and driving savings in indirect costs through the implementation of a "procure-to-pay" program. In realizing the savings, the Company expects to incur total nonrecurring costs by 2011 approximately equal to the annualized savings.
New Operating Structure
As previously communicated, effective July 1, 2008, the Company made certain changes to its operating structure to align geographic responsibility. The European Union Group was reconfigured to include the Adriatic and Balkans Region and was renamed the Europe Group; and the remaining Eurasia Group was combined with the Africa Group into the new Eurasia & Africa Group. The changes in operating structure did not impact the other existing geographic operating segments, Bottling Investments or Corporate. Reporting on the new structure will start with third quarter 2008 results. Reclassified operating segment information will be published during the third quarter of 2008.
Items Impacting Prior Year Results
In 2007, the second quarter results included a net charge of $0.05 per share primarily related to restructuring charges and a non-cash impairment charge at an equity investee. In 2007, the first quarter results included a net charge of $0.02 per share primarily related to an asset write-off in the Philippines bottler, partially offset by gains on the sales of the equity interest in a Brazilian bottler and real estate in Spain.
Conference Call
The Company will host a conference call with investors and analysts to discuss the second quarter results today at 8:30 a.m. (EDT). The Company invites investors to listen to the live audiocast of the conference call at the Company's Web site, 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 the Company's Web site. Further, the "Investors" section of the Company's Web site includes a reconciliation of non-GAAP financial measures that may be used periodically by management when discussing the Company's 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
------------------------------------
June 27, 2008 June 29, 2007 % Change
------------- ------------- --------
Net Operating Revenues $ 9,046 $ 7,733 17
Cost of goods sold 3,162 2,736 16
------------- -------------
Gross Profit 5,884 4,997 18
Selling, general and
administrative expenses 3,108 2,685 16
Other operating charges 97 42 --
------------- -------------
Operating Income 2,679 2,270 18
Interest income 69 54 28
Interest expense 89 102 (13)
Equity income - net (843) 190 --
Other income (loss) - net 80 (4) --
------------- -------------
Income Before Income Taxes 1,896 2,408 (21)
Income taxes 474 557 (15)
------------- -------------
Net Income $ 1,422 $ 1,851 (23)
============= =============
Diluted Net Income Per Share(1) $ 0.61 $ 0.80 (24)
============= =============
Average Shares Outstanding -
Diluted(1) 2,343 2,326
============= =============
(1) For the second quarter, "Basic Net Income Per Share" was $0.61 for
2008 and $0.80 for 2007 based on "Average Shares Outstanding -
Basic" of 2,316 and 2,312 for 2008 and 2007, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
----------------------------------------------------------------------
Six Months Ended
------------------------------------
June 27, 2008 June 29, 2007 % Change
------------- ------------- --------
Net Operating Revenues $ 16,425 $ 13,836 19
Cost of goods sold 5,786 4,881 19
------------- -------------
Gross Profit 10,639 8,955 19
Selling, general and
administrative expenses 5,911 5,010 18
Other operating charges 175 48 --
------------- -------------
Operating Income 4,553 3,897 17
Interest income 134 91 47
Interest expense 206 173 19
Equity income - net (706) 210 --
Other income - net 69 112 --
------------- -------------
Income Before Income Taxes 3,844 4,137 (7)
Income taxes 922 1,024 (10)
------------- -------------
Net Income $ 2,922 $ 3,113 (6)
============= =============
Diluted Net Income Per Share(1) $ 1.24 $ 1.34 (7)
============= =============
Average Shares Outstanding -
Diluted(1) 2,349 2,324
============= =============
(1) For the six months, "Basic Net Income Per Share" was $1.26 for
2008 and $1.35 for 2007 based on "Average Shares Outstanding -
Basic" of 2,319 and 2,313 for 2008 and 2007, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(UNAUDITED)
(In millions except par value)
----------------------------------------------------------------------
June 27, December 31,
2008 2007
------------ ------------
Assets
----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 6,571 $ 4,093
Marketable securities 286 215
Trade accounts receivable, less
allowances of $77 and $56, respectively 4,073 3,317
Inventories 2,531 2,220
Prepaid expenses and other assets 2,628 2,260
------------ ------------
Total Current Assets 16,089 12,105
------------ ------------
Investments
Equity method investments 6,815 7,289
Cost method investments, principally
bottling companies 552 488
------------ ------------
Total Investments 7,367 7,777
------------ ------------
Other Assets 2,634 2,675
Property, Plant and Equipment - net 8,712 8,493
Trademarks With Indefinite Lives 6,025 5,153
Goodwill 4,062 4,256
Other Intangible Assets 2,842 2,810
------------ ------------
Total Assets $ 47,731 $ 43,269
============ ============
Liabilities and Shareowners' Equity
----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 7,978 $ 6,915
Loans and notes payable 7,752 5,919
Current maturities of long-term debt 531 133
Accrued income taxes 359 258
------------ ------------
Total Current Liabilities 16,620 13,225
------------ ------------
Long-Term Debt 2,874 3,277
Other Liabilities 3,267 3,133
Deferred Income Taxes 1,788 1,890
Shareowners' Equity
Common stock, $0.25 par value; Authorized
- 5,600 shares; Issued - 3,519 shares
and 3,519 shares, respectively 880 880
Capital surplus 7,805 7,378
Reinvested earnings 37,386 36,235
Accumulated other comprehensive income
(loss) 1,352 626
Treasury stock, at cost - 1,209 shares
and 1,201 shares, respectively (24,241) (23,375)
------------ ------------
Total Shareowners' Equity 23,182 21,744
------------ ------------
Total Liabilities and Shareowners' Equity $ 47,731 $ 43,269
============ ============
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
(In millions)
----------------------------------------------------------------------
Six Months Ended
---------------------------
June 27, 2008 June 29, 2007
------------- -------------
Operating Activities
Net income $ 2,922 $ 3,113
Depreciation and amortization 637 515
Stock-based compensation expense 152 155
Deferred income taxes (222) (44)
Equity income or loss, net of dividends 856 (82)
Foreign currency adjustments (43) (25)
Gains on sales of assets, including
bottling interests (111) (139)
Other operating charges 159 48
Other items 34 49
Net change in operating assets and
liabilities (1,166) (295)
------------- -------------
Net cash provided by operating
activities 3,218 3,295
------------- -------------
Investing Activities
Acquisitions and investments,
principally trademarks and bottling
companies (621) (3,649)
Purchases of other investments (140) (41)
Proceeds from disposals of other
investments 387 258
Purchases of property, plant and
equipment (896) (770)
Proceeds from disposals of property,
plant and equipment 46 151
Other investing activities (10) 5
------------- -------------
Net cash used in investing
activities (1,234) (4,046)
------------- -------------
Financing Activities
Issuances of debt 4,317 5,762
Payments of debt (2,478) (2,080)
Issuances of stock 459 643
Purchases of stock for treasury (1,031) (958)
Dividends (884) (787)
------------- -------------
Net cash provided by financing
activities 383 2,580
------------- -------------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 111 95
------------- -------------
Cash and Cash Equivalents
Net increase during the period 2,478 1,924
Balance at beginning of period 4,093 2,440
------------- -------------
Balance at end of period $ 6,571 $ 4,364
============= =============
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
----------------------------------------------------------------------
Three Months Ended
----------------------------------------------------------------------
----------------------------------------------------------------------
Net Operating Revenues Operating Income (Loss)
-------------- -------------------------- --------------------------
June 27, June 29, June 27, June 29,
2008 2007 % Fav. / 2008 2007 % Fav. /
(1) (5) (Unfav.) (2) (6) (Unfav.)
-------------- -------- -------- -------- -------- -------- --------
Africa $ 318 $ 300 6 $ 127 $ 79 61
Eurasia 456 352 30 196 162 21
European Union 1,636 1,449 13 962 829 16
Latin America 960 779 23 531 413 29
North America 2,256 2,083 8 457 500 (9)
Pacific 1,324 1,170 13 604 506 19
Bottling
Investments 2,701 2,076 30 156 75 108
Corporate 29 18 61 (354) (294) (20)
Eliminations (634) (494) - - - -
-------- -------- -------- -------- -------- --------
Consolidated $ 9,046 $ 7,733 17 $ 2,679 $ 2,270 18
----------------------------------------------------------------------
----------------------------------------------------------------------
Income (Loss) Before Income Taxes
----------------------------------- ----------------------------------
June 27, June 29,
2008 2007 % Fav. /
(2),(3),(4) (6),(7) (Unfav.)
----------------------------------- ------------ ------------ --------
Africa $ 125 $ 78 60
Eurasia 198 170 16
European Union 975 839 16
Latin America 534 412 30
North America 462 498 (7)
Pacific 597 497 20
Bottling Investments (711) 247 -
Corporate (284) (333) 15
Eliminations - - -
------------ ------------ --------
Consolidated $ 1,896 $ 2,408 (21)
----------------------------------------------------------------------
(1) Intersegment revenues for the three months ended June 27, 2008
were $16 million for Africa, $50 million for Eurasia, $299
million for European Union, $63 million for Latin America, $16
million for North America, $97 million for Pacific and $93
million for Bottling Investments.
(2) Operating income (loss) and income (loss) before income taxes for
the three months ended June 27, 2008 were reduced by
approximately $4 million for North America, $5 million for
Bottling Investments and $88 million for Corporate, primarily due
to restructuring costs, contract termination costs and asset
write-downs.
(3) Income (loss) before income taxes for the three months ended June
27, 2008 was reduced by approximately $1.1 billion for Bottling
Investments, primarily as a result of our proportionate share of
an impairment charge recorded by CCE.
(4) Income (loss) before income taxes for the three months ended June
27, 2008 was increased by approximately $102 million for Bottling
Investments and Corporate, primarily due to a gain on the sale of
Refrigerantes Minas Gerais Ltda.
(5) Intersegment revenues for the three months ended June 29, 2007
were $12 million for Africa, $43 million for Eurasia, $216
million for European Union, $22 million for Latin America, $21
million for North America, $135 million for Pacific and $45
million for Bottling Investments.
(6) Operating income (loss) and income (loss) before income taxes for
the three months ended June 29, 2007 were reduced by
approximately $18 million for Africa, $5 million for European
Union, $2 million for Latin America, $1 million for Pacific, $23
million for Bottling Investments, primarily related to asset
impairments and restructuring costs, and were increased by $1
million for Corporate. These amounts were primarily recorded in
other operating charges.
(7) Income (loss) before income taxes for the three months ended June
29, 2007 was reduced by approximately $89 million for Bottling
Investments, primarily due to our proportionate share of asset
write-downs and restructuring charges recorded by equity method
investees.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
----------------------------------------------------------------------
Six Months Ended
----------------------------------------------------------------------
----------------------------------------------------------------------
Net Operating Revenues Operating Income (Loss)
-------------- -------------------------- --------------------------
June 27, June 29, June 27, June 29,
2008 2007 % Fav. / 2008 2007 % Fav. /
(1) (5) (Unfav.) (2) (6) (Unfav.)
-------------- -------- -------- -------- -------- -------- --------
Africa $ 632 $ 610 4 $ 253 $ 191 32
Eurasia 782 571 37 341 249 37
European Union 2,911 2,539 15 1,653 1,433 15
Latin America 1,861 1,498 24 1,037 828 25
North America 4,154 3,764 10 781 847 (8)
Pacific 2,328 2,109 10 992 878 13
Bottling
Investments 4,790 3,533 36 173 73 137
Corporate 57 32 78 (677) (602) (12)
Eliminations (1,090) (820) - - - -
-------- -------- -------- -------- -------- --------
Consolidated $16,425 $13,836 19 $4,553 $3,897 17
----------------------------------------------------------------------
----------------------------------------------------------------------
Income (Loss) Before Income Taxes
----------------------------------- ----------------------------------
June 27, June 29,
2008 2007 % Fav. /
(2),(3),(4) (6),(7) (Unfav.)
----------------------------------- ------------ ------------ --------
Africa $ 247 $ 186 33
Eurasia 341 260 31
European Union 1,675 1,453 15
Latin America 1,038 827 26
North America 787 846 (7)
Pacific 980 864 13
Bottling Investments (556) 254 -
Corporate (668) (553) (21)
Eliminations - - -
------------ ------------ --------
Consolidated $ 3,844 $ 4,137 (7)
----------------------------------------------------------------------
(1) Intersegment revenues for the six months ended June 27, 2008 were
$28 million for Africa, $80 million for Eurasia, $529 million for
European Union, $120 million for Latin America, $30 million for
North America, $188 million for Pacific and $115 million for
Bottling Investments.
(2) Operating income (loss) and income (loss) before income taxes for
the six months ended June 27, 2008 were reduced by approximately
$6 million for North America, $5 million for Bottling Investments
and $164 million for Corporate, primarily due to restructuring
costs, contract termination costs and asset write-downs.
(3) Income (loss) before income taxes for the six months ended June
27, 2008 was reduced by approximately $1.1 billion for Bottling
Investments, primarily as a result of our proportionate share of
an impairment charge recorded by CCE.
(4) Income (loss) before income taxes for the six months ended June
27, 2008 was increased by approximately $102 million for Bottling
Investments and Corporate, primarily due to the gain on the sale
of Refrigerantes Minas Gerais Ltda.
(5) Intersegment revenues for the six months ended June 29, 2007 were
$22 million for Africa, $67 million for Eurasia, $384 million for
European Union, $60 million for Latin America, $37 million for
North America, $185 million for Pacific and $65 million for
Bottling Investments.
(6) Operating income (loss) and income (loss) before income taxes for
the six months ended June 29, 2007 were reduced by approximately
$20 million for Africa, $5 million for European Union, $2 million
for Latin America, $1 million for Pacific, $29 million for
Bottling Investments and $1 million for Corporate, primarily due
to asset impairments and restructuring costs. These amounts were
primarily recorded in other operating charges.
(7) Income (loss) before income taxes for the six months ended June
29, 2007 was reduced by approximately $162 million for Bottling
Investments, primarily due to our proportionate share of asset
write-downs and restructuring charges recorded by equity method
investees, and was increased by approximately $136 million for
Corporate, primarily due to gains on the sale of real estate in
Spain and the sale of our equity ownership in Vonpar, a bottler
in Brazil.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures
(UNAUDITED)
(In millions except per share data)
----------------------------------------------------------------------
----------------------------------
Three Months Ended June 27, 2008
----------------------------------
Items Impacting
Comparability
-------------------------
Asset
Reported Impairments/ Equity
(GAAP) Restructuring Investees
-------- -------------------------
Net Operating Revenues $9,046
Cost of goods sold 3,162
----------------------------------
Gross Profit 5,884
Selling, general and administrative
expenses 3,108
Other operating charges 97 ($97)
----------------------------------
Operating Income (3) 2,679 97
Interest income 69
Interest expense 89
Equity income - net (843) $1,132
Other income (loss) - net 80
----------------------------------
Income Before Income Taxes 1,896 97 1,132
Income taxes 474 22 230
----------------------------------
Net Income $1,422 $ 75 $ 902
==================================
Diluted Net Income Per Share $ 0.61 $ 0.03 $ 0.38
==================================
Average Shares Outstanding -
Diluted 2,343 2,343 2,343
==================================
Gross Margin 65.0%
Operating Margin 29.6%
Effective Tax Rate 25.0%
----------------------------------
----------------------------------
Three Months Ended June 29, 2007
----------------------------------
Items Impacting
Comparability
-------------------------
Asset
Reported Impairments/ Equity
(GAAP) Restructuring Investees
-------- -------------------------
Net Operating Revenues $7,733
Cost of goods sold 2,736 ($6)
----------------------------------
Gross Profit 4,997 6
Selling, general and administrative
expenses 2,685
Other operating charges 42 (42)
----------------------------------
Operating Income 2,270 48
Interest income 54
Interest expense 102
Equity income - net 190 $ 89
Other income (loss) - net (4)
----------------------------------
Income Before Income Taxes 2,408 48 89
Income taxes 557 12 26
----------------------------------
Net Income $1,851 $ 36 $ 63
==================================
Diluted Net Income Per Share $ 0.80 $ 0.02 $ 0.03
==================================
Average Shares Outstanding -
Diluted 2,326 2,326 2,326
==================================
Gross Margin 64.6%
Operating Margin 29.4%
Effective Tax Rate 23.1%
----------------------------------
------------------------------------
Three Months Ended June 27, 2008
------------------------------------
Items
Impacting
Comparability
------------------------
After
Considering
Transaction Certain Tax Items
Gains Matters (1) (Non-GAAP)
------------------------ -----------
Net Operating Revenues $9,046
Cost of goods sold 3,162
------------------------------------
Gross Profit 5,884
Selling, general and
administrative expenses 3,108
Other operating charges -
------------------------------------
Operating Income (3) 2,776
Interest income 69
Interest expense 89
Equity income - net 289
Other income (loss) - net ($102) (22)
------------------------------------
Income Before Income Taxes (102) 3,023
Income taxes (32) ($29) 665
------------------------------------
Net Income ($70) $ 29 $2,358
====================================
Diluted Net Income Per
Share ($0.03) $ 0.01 $ 1.01 (4)
====================================
Average Shares Outstanding
- Diluted 2,343 2,343 2,343
====================================
Gross Margin 65.0%
Operating Margin 30.7%
Effective Tax Rate 22.0%
------------------------------------
------------------------------------
Three Months Ended June 29, 2007
------------------------------------
Items
Impacting
Comparability
------------------------
After
Gains on Considering
Sales of Certain Tax Items
Assets Matters (1) (Non-GAAP)
------------------------ -----------
Net Operating Revenues $7,733
Cost of goods sold 2,730
------------------------------------
Gross Profit 5,003
Selling, general and
administrative expenses 2,685
Other operating charges -
------------------------------------
Operating Income 2,318
Interest income 54
Interest expense 102
Equity income - net 279
Other income (loss) - net $ 1 (3)
------------------------------------
Income Before Income Taxes 1 2,546
Income taxes - ($30) 565
------------------------------------
Net Income $ 1 $ 30 $1,981
====================================
Diluted Net Income Per
Share $ 0.00 $ 0.01 $ 0.85 (4)
====================================
Average Shares Outstanding
- Diluted 2,326 2,326 2,326
====================================
Gross Margin 64.7%
Operating Margin 30.0%
Effective Tax Rate 22.2%
------------------------------------
----------- -----------
% Change -
After
% Change - Considering
Reported Items
(GAAP) (Non-GAAP)
----------- -----------
Net Operating Revenues 17 17 (2)
Cost of goods sold 16 16
Gross Profit 18 18
Selling, general and administrative
expenses 16 16
Other operating charges -- --
Operating Income (3) 18 20 (3)
Interest income 28 28
Interest expense (13) (13)
Equity income - net -- 4
Other income (loss) - net -- --
Income Before Income Taxes (21) 19
Income taxes (15) 18
Net Income (23) 19
Diluted Net Income Per Share (24) 19
Average Shares Outstanding - Diluted
Gross Margin
Operating Margin
Effective Tax Rate
----------- -----------
Net Operating Revenues
Cost of goods sold
Gross Profit
Selling, general and administrative
expenses
Other operating charges
Operating Income
Interest income
Interest expense
Equity income - net
Other income (loss) - net
Income Before Income Taxes
Income taxes
Net Income
Diluted Net Income Per Share
Average Shares Outstanding - Diluted
Gross Margin
Operating Margin
Effective Tax Rate
Note: 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.
(1) Primarily related to changes in reserves related to certain tax
matters.
(2) Net operating revenues excluding structural changes:
2008 2007 % Change
------- ------- --------
Reported net operating
revenues $9,046 $7,733 17%
Structural changes (325) (168) --
------------------------
Net operating revenues
excluding structural changes $8,721 $7,565 15%
========================
(3) Operating income after considering items impacting comparability
for the three months ended June 27, 2008 includes a positive
currency impact of approximately 11%. Currency neutral operating
income growth after considering items impacting comparability is
9%.
(4) Per share amounts do not add due to rounding.
----------------------------------------------------------------------
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 Table above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended June 27, 2008 and June 29, 2007. 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
(UNAUDITED)
(In millions except per share data)
----------------------------------------------------------------------
----------------------------------
Six Months Ended June 27, 2008
----------------------------------
Items Impacting
Comparability
-------------------------
Asset
Reported Impairments/ Equity
(GAAP) Restructuring Investees
-------- -------------------------
Net Operating Revenues $16,425
Cost of goods sold 5,786
----------------------------------
Gross Profit 10,639
Selling, general and administrative
expenses 5,911
Other operating charges 175 ($175)
----------------------------------
Operating Income 4,553 175
Interest income 134
Interest expense 206
Equity income - net (706) $1,127
Other income (loss) - net 69
----------------------------------
Income Before Income Taxes 3,844 175 1,127
Income taxes 922 35 216
----------------------------------
Net Income $ 2,922 $ 140 $ 911
==================================
Diluted Net Income Per Share $ 1.24 $ 0.06 $ 0.39
==================================
Average Shares Outstanding -
Diluted 2,349 2,349 2,349
==================================
Gross Margin 64.8%
Operating Margin 27.7%
Effective Tax Rate 24.0%
----------------------------------
----------------------------------
Six Months Ended June 29, 2007
----------------------------------
Items Impacting
Comparability
-------------------------
Asset
Reported Impairments/ Equity
(GAAP) Restructuring Investee
-------- -------------------------
Net Operating Revenues $13,836
Cost of goods sold 4,881 ($10)
----------------------------------
Gross Profit 8,955 10
Selling, general and administrative
expenses 5,010
Other operating charges 48 (48)
----------------------------------
Operating Income 3,897 58
Interest income 91
Interest expense 173
Equity income - net 210 $ 162
Other income (loss) - net 112
----------------------------------
Income Before Income Taxes 4,137 58 162
Income taxes 1,024 14 26
----------------------------------
Net Income $ 3,113 $ 44 $ 136
==================================
Diluted Net Income Per Share $ 1.34 $ 0.02 $ 0.06
==================================
Average Shares Outstanding -
Diluted 2,324 2,324 2,324
==================================
Gross Margin 64.7%
Operating Margin 28.2%
Effective Tax Rate 24.8%
----------------------------------
------------------------------------
Six Months Ended June 27, 2008
------------------------------------
Items
Impacting
Comparability
------------------------
After
Considering
Transaction Certain Tax Items
Gains Matters (1) (Non-GAAP)
------------------------ -----------
Net Operating Revenues $16,425
Cost of goods sold 5,786
------------------------------------
Gross Profit 10,639
Selling, general and
administrative expenses 5,911
Other operating charges -
------------------------------------
Operating Income 4,728
Interest income 134
Interest expense 206
Equity income - net 421
Other income (loss) - net ($102) (33)
------------------------------------
Income Before Income Taxes (102) 5,044
Income taxes (32) ($31) 1,110
------------------------------------
Net Income ($70) $ 31 $ 3,934
====================================
Diluted Net Income Per Share ($0.03) $ 0.01 $ 1.67
====================================
Average Shares Outstanding -
Diluted 2,349 2,349 2,349
====================================
Gross Margin 64.8%
Operating Margin 28.8%
Effective Tax Rate 22.0%
------------------------------------
------------------------------------
Six Months Ended June 29, 2007
------------------------------------
Items
Impacting
Comparability
------------------------
After
Considering
Transaction Certain Tax Items
Gains Matters (1) (Non-GAAP)
------------------------ -----------
Net Operating Revenues $13,836
Cost of goods sold 4,871
------------------------------------
Gross Profit 8,965
Selling, general and
administrative expenses 5,010
Other operating charges -
------------------------------------
Operating Income 3,955
Interest income 91
Interest expense 173
Equity income - net 372
Other income (loss) - net ($136) (24)
------------------------------------
Income Before Income Taxes (136) 4,221
Income taxes (73) ($41) 950
------------------------------------
Net Income ($63) $ 41 $ 3,271
====================================
Diluted Net Income Per Share ($0.03) $ 0.02 $ 1.41
====================================
Average Shares Outstanding -
Diluted 2,324 2,324 2,324
====================================
Gross Margin 64.8%
Operating Margin 28.6%
Effective Tax Rate 22.5%
------------------------------------
----------- -----------
% Change -
After
% Change - Considering
Reported Items
(GAAP) (Non-GAAP)
----------- -----------
Net Operating Revenues 19 19(2)
Cost of goods sold 19 19
Gross Profit 19 19
Selling, general and administrative
expenses 18 18
Other operating charges -- --
Operating Income 17 20(3)
Interest income 47 47
Interest expense 19 19
Equity income - net -- 13
Other income (loss) - net -- --
Income Before Income Taxes (7) 19
Income taxes (10) 17
Net Income (6) 20
Diluted Net Income Per Share (7) 18
Average Shares Outstanding - Diluted
Gross Margin
Operating Margin
Effective Tax Rate
----------- -----------
Net Operating Revenues
Cost of goods sold
Gross Profit
Selling, general and administrative
expenses
Other operating charges
Operating Income
Interest income
Interest expense
Equity income - net
Other income (loss) - net
Income Before Income Taxes
Income taxes
Net Income
Diluted Net Income Per Share
Average Shares Outstanding - Diluted
Gross Margin
Operating Margin
Effective Tax Rate
Note: 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.
(1) Primarily related to changes in reserves related to certain tax
matters.
(2) Net operating revenues excluding structural changes:
2008 2007 % Change
-------- -------- --------
Reported net operating
revenues $16,425 $13,836 19%
Structural changes (746) (297) --
-------- -------- --------
Net operating revenues
excluding structural
changes $15,679 $13,539 16%
======== ======== ========
(3) Operating income after considering items impacting comparability
for the six months ended June 27, 2008 includes a positive
currency impact of approximately 11%. Currency neutral operating
income growth after considering items impacting comparability is
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 Table above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the six months ended June 27, 2008 and June 29, 2007. 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 is the world's largest beverage company, refreshing consumers with more than 450 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 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 1.5 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 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 increased consumer information; increased competition; our ability to expand our operations in emerging markets; foreign currency and interest rate fluctuations; our ability to maintain good relationships with our bottling partners; the financial condition of our bottlers; our ability to maintain good labor relations, including our ability to renew collective bargaining agreements on satisfactory terms and avoid strikes or work stoppages; increase in the cost of energy; increase in cost, disruption of supply or shortage of raw materials; changes in laws and regulations relating to beverage containers and packaging, including mandatory deposit, recycling, eco-tax and/or product stewardship laws or regulations; adoption of significant additional labeling or warning requirements; 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 product quality 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; 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.
Source: The Coca-Cola Company
Released July 17, 2008