The Coca-Cola Company Reports Fourth Quarter and Full Year 2008 Results
Strong worldwide unit case volume with 4 percent growth in the quarter and 5 percent growth for the full year. International operations delivered 6 percent unit case volume growth for both the quarter and full year. Global volume and value share gains continued across key markets and categories. Solid cash generation continued, with full year cash flow from operations up 6 percent. Fourth quarter reported EPS was $0.43. Comparable EPS up 10 percent to $0.64, reflecting nine consecutive quarters of double-digit comparable EPS growth. Full year reported EPS was $2.49 and comparable EPS up 17 percent to $3.15. Operating income growth of 12 percent on a reported basis and 10 percent on a comparable basis in the quarter. Full year operating income grew 16 percent on a reported basis and 17 percent on a comparable basis. Productivity program initiatives accelerating and are on track to deliver $500 million in annualized savings by year-end 2011.
ATLANTA--(BUSINESS WIRE)-- The Coca-Cola Company today reported unit case volume growth of 4 percent in the fourth quarter and 5 percent for the full year, successfully cycling 5 percent and 6 percent growth in the prior year quarter and full year, respectively. Acquisitions contributed 1 point of unit case volume growth for the quarter and 2 points of growth for the full year.
The Company achieved broad-based growth across the globe. In key emerging markets, China increased unit case volume 29 percent, India increased 28 percent and Eastern Europe increased double digits in the quarter. Latin America delivered solid, balanced growth in unit case volume led by Mexico increasing 6 percent and Brazil increasing 7 percent in the quarter. Europe achieved unit case volume growth of 2 percent in the quarter successfully cycling 3 percent growth in the prior year. In other key markets, North America unit case volume declined 3 percent in the quarter and unit case volume in Japan was even.
Sparkling beverages increased unit case volume 2 percent in both the quarter and full year. Trademarks Coca-Cola, Fanta and Sprite contributed to the results, increasing unit case volume 2 percent, 3 percent and 6 percent, respectively, for the year. International sparkling beverage unit case volume increased 4 percent for both the quarter and full year.
Still beverage unit case volume increased 11 percent in the quarter and 13 percent for the full year, led by strong growth across the portfolio, including juice and juice drinks, teas, active lifestyle and water brands. International still beverage unit case volume increased 17 percent for both the quarter and full year.
Globally, the Company continued to gain volume and value share in nonalcoholic ready-to-drink beverages as well as in core sparkling and still beverages for both the quarter and full year.
Financial Highlights
Cash flow from operations was $7.6 billion for the year, compared with $7.1 billion in the prior year, an increase of 6 percent.
The Company reported fourth quarter earnings per share of $0.43. After considering items impacting comparability, earnings per share for the quarter were $0.64, an increase of 10 percent. Reported earnings per share for the quarter included a net charge of $0.21 per share primarily related to a non-cash impairment charge at Coca-Cola Enterprises Inc., an equity investee ("CCE"), restructuring charges and asset write-downs. Reported earnings per share for the fourth quarter of 2007 were $0.52 and included a net charge of $0.06 primarily related to restructuring charges and asset write-downs.
Earnings per share for the year were $2.49 on a reported basis. After considering items impacting comparability, earnings per share for the year were $3.15, an increase of 17 percent. Reported earnings per share for the year included a net charge of $0.66 per share primarily related to non-cash impairment charges at CCE, restructuring charges and asset write-downs. Full year 2007 reported earnings per share were $2.57 and included a net charge of $0.13 per share primarily related to restructuring charges and asset write-downs.
Operating income in the quarter increased 12 percent on a reported basis and increased 10 percent after considering items impacting comparability. Items impacting comparability reduced fourth quarter pre-tax operating income by $108 million in 2008 and by $126 million in 2007. Currency negatively impacted comparable operating income in the quarter by 9 percent. Full year operating income increased 16 percent on a reported basis and increased 17 percent after considering items impacting comparability. Currency benefited both full year reported and comparable operating income by 6 percent.
The Company is currently on track to deliver $500 million in annualized savings from productivity initiatives by year-end 2011. The continued acceleration of these efforts will enable cash flows to be redeployed to drive investments for growth.
"Our performance in the fourth quarter was very solid," said Muhtar Kent, president and chief executive officer, The Coca-Cola Company. "Our fourth quarter and full year 2008 results reflect both the universal appeal of our global brands and the unrivalled reach of one of the world's leading consumer products distribution systems. We delivered consistent, quality results for the quarter and for the full year. For the year, we again exceeded our long-term growth targets despite a very challenging economic environment. And importantly, we gained volume and value share in most of our leading markets through solid execution of our strategies."
"Our highly skilled management team is assertively addressing the challenges posed by the current global economic crisis. Working in close collaboration with our bottling partners, we successfully accelerated actions, refocused investments and intensified our disciplined execution to drive results. We also made significant gains in realigning our organizational structure to generate greater productivity and in rewiring our business for sustainable results.
While certainly not crisis proof, as no company is, I do believe our global business model is relatively resilient, as we bring simple moments of pleasure to our consumers, nearly 1.6 billion times a day, for cents at a time. We recognize that 2009 will bring many unique challenges to us and our consumers, customers, and bottling partners. Yet, I believe that our solid brand and business fundamentals - together with a fundamentally sound balance sheet, robust cash generating model and strong global bottling system - provide a sound foundation for our management team to continue driving long-term sustainable growth."
(All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.)
(All references to unit case volume percentage changes in this section are computed based on average daily sales for the fourth quarter and computed on a reported basis for the full year. Group operational highlights are reported in line with the Company's operating structure as described in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2008.)
Q4 2008 FY 2008
Unit
Net Revenues Operating Unit Case Net Operating
Case Income Volume Revenues Income
Volume
Total Company 4 % (3 %) 12 % 5 % 11 % 16 %
Eurasia and 7 % (12 %) (16 %) 7 % 10 % 25 %
Africa
Europe 2 % (3 %) 14 % 3 % 10 % 14 %
Latin America 6 % 3 % 2 % 8 % 18 % 20 %
North America (3 %) 5 % 2 % (1 %) 6 % (7 %)
Pacific 9 % Even (5 %) 8 % 7 % 9 %
Bottling (1 %) (13 %) 14 % 14 % 16 % 73 %
Investments
Eurasia and Africa
-- The Eurasia and Africa Group's unit case volume increased 7 percent in
the quarter and full year, cycling double-digit growth in both the prior
year quarter and full year. Net revenues for the year increased 10
percent, reflecting a 7 percent increase in concentrate sales with
positive pricing and mix partially offset by a 4 percent negative impact
from currency. Full year operating income increased 25 percent primarily
reflecting the increase in net revenues and the continued investment in
key marketing and business initiatives.
-- Eurasia and Africa delivered solid growth, with sparkling beverages
increasing 4 percent and still beverages increasing 21 percent for the
year. Unit case volume expanded across most markets in the quarter and
full year, with double-digit growth in key markets. India, South Africa
and Nigeria increased 28 percent, 11 percent and 12 percent in the
quarter, respectively. Russia's unit case volume declined 8 percent in
the quarter and was even for the year, reflecting the impact of a more
challenging economic environment and adverse weather conditions in the
summer.
-- Share gains continued for the Eurasia and Africa Group in the quarter
and full year led by volume and value share gains in Russia and Turkey
in nonalcoholic ready-to-drink beverages.
Europe
-- Unit case volume in the Europe Group increased 2 percent in the quarter
and 3 percent for the full year. Net revenues for the year increased 10
percent, reflecting even concentrate sales, positive pricing and mix and
a high single-digit currency benefit. Full year operating income
increased 14 percent reflecting both higher net revenues and continuing
investment to support key initiatives across the group.
-- Europe delivered solid growth for the year with unit case volume for
sparkling beverages increasing 1 percent, with Trademark Coca-Cola
growth of 1 percent. Still beverages increased 11 percent for the year,
led by solid performance across the portfolio. Unit case volume growth
in Europe was driven by double-digit growth in Eastern Europe for the
quarter and high single-digit growth for the full year.
-- Key countries across the group including Germany, Great Britain and
France gained volume and value share in nonalcoholic ready-to-drink
beverages in the quarter.
Latin America
-- The Latin America Group delivered strong unit case volume growth of 6
percent in the quarter and 8 percent for the year, cycling 10 percent
and 9 percent growth in the prior year quarter and full year,
respectively. Net revenues for the year increased 18 percent, reflecting
a 6 percent increase in concentrate sales, positive pricing and mix as
well as a 4 percent currency benefit. Operating income for the year
increased 20 percent reflecting the net revenue increase and continuing
investment in key marketing initiatives.
-- Latin America delivered growth across the portfolio with sparkling
beverages increasing 4 percent and still beverages increasing 40 percent
for the year. Unit case volume expanded across all key markets in the
quarter and full year, with Mexico, Brazil and Argentina increasing 9
percent, 7 percent and 5 percent for the full year, respectively.
Acquisitions contributed 1 point of the overall unit case volume growth
in the quarter and 3 points for the full year.
-- For the quarter and full year, volume and value share gains continued
for the Latin America Group in both sparkling and still beverages.
North America
-- Unit case volume in the North America Group declined 3 percent in the
quarter, driven by significant bottler price increases and poor
macroeconomic conditions partially offset by strong consumer marketing,
value creating customer programs and good bottler execution. Retail unit
case volume declined 4 percent, while Foodservice and Hospitality
increased 1 percent. For the year, unit case volume declined 1 percent,
including a 1 percent benefit from acquisitions. Net revenues for the
year increased 6 percent, reflecting a 2 percent decline in concentrate
sales, offset by positive pricing and mix. Operating income decreased 7
percent for the year with higher input costs and continued investment in
strategic marketing initiatives offsetting increased net revenues.
-- Sparkling beverage unit case volume declined 4 percent in the quarter
and 3 percent for the year. Continued successful execution of the
three-cola strategy helped the Coca-Cola, Diet Coke and Coca-Cola Zero
portfolio gain volume and value share in the U.S. for the full year.
Coca-Cola Zero continued its stellar performance, increasing unit case
volume 29 percent in the quarter and 36 percent for the full year.
-- Still beverage unit case volume increased 1 percent in the quarter and 5
percent for the full year, and achieved volume and value share gains,
due to the continued strong performance of glaceau, Fuze, Trademark
Simply and Minute Maid Enhanced Juices.
Pacific
-- The Pacific Group increased unit case volume 9 percent in the quarter
and 8 percent for the year, successfully cycling 3 percent and 7 percent
growth in the prior year quarter and full year, respectively. Net
revenues for the year increased 7 percent, reflecting an 8 percent
increase in concentrate sales and a high single-digit currency benefit
partially offset by the impact of structural changes and unfavorable
product mix. Operating income for the year increased 9 percent
reflecting the net revenue increase and continued investments in key
business initiatives.
-- Pacific delivered growth across the portfolio with sparkling beverages
increasing 8 percent and still beverages increasing 7 percent for the
year led by solid performance in key markets.
-- China unit case volume increased 29 percent in the quarter and 19
percent for the year. The results were led by double-digit unit case
volume growth in Trademark Coca-Cola, Trademark Sprite and Minute Maid
along with the successful launch of Yuan Ye, an original green leaf tea,
each of which contributed to volume and value share gains in
nonalcoholic ready-to-drink beverages as well as in sparkling and still
beverages for the year.
-- Japan unit case volume was even in the quarter and full year. Sparkling
beverages delivered unit case volume growth of 8 percent in the quarter
led by Trademark Coca-Cola and Trademark Fanta, which grew unit case
volume 8 percent and 16 percent, respectively. Strong performance by
Coca-Cola Zero and Fanta FuruFuru supported this growth. Unit case
volume declines in Sokenbicha and Aquarius offset strong growth in
sparkling beverages. Japan gained volume and value share in nonalcoholic
ready-to-drink beverages for the quarter and full year.
-- In the Philippines, unit case volume increased 1 percent in the quarter,
returning to growth after two quarters of sequential decline, and
increased 3 percent for the year. The Philippines gained volume and
value share in nonalcoholic ready-to-drink beverages for the year
despite operating in a more challenging economic environment.
-- Volume and value share gains continued for the Pacific Group in both
sparkling and still beverages for the year.
Bottling Investments
-- The Bottling Investments Group's unit case volume decreased 1 percent in
the quarter, reflecting bottling divestitures partially offset by
organic growth across most operations. For the full year, unit case
volume increased 14 percent, reflecting both organic growth and a
benefit from acquisitions partially offset by bottling divestitures. Net
revenues increased 16 percent for the year due to the unit case volume
increase, a mid single-digit currency benefit and the impact of
structural changes. Operating income increased 73 percent for the year
reflecting the net revenue increase and the benefits of supply chain
efficiencies and controlled operating expenses, partially offset by
higher commodity input costs and continued investments to enhance market
execution capabilities.
Financial Review
Operating Results
Net operating revenues for the fourth quarter decreased 3 percent, with a 4 percent increase in concentrate sales and a 4 percent favorable impact from pricing and mix, offset by a 4 percent decrease from structural changes primarily related to bottling divestitures and a 7 percent negative currency impact. For the year, net operating revenues increased 11 percent, reflecting a 4 percent increase in concentrate sales, a 4 percent benefit from currency and a 3 percent favorable impact from pricing and mix.
Cost of goods sold decreased 3 percent for the quarter. This reflects a 4 percent increase in concentrate sales as well as increases in commodity-based input and freight costs offset by a 6 percent decrease from currency and a 7 percent decrease from structural changes primarily related to bottling divestitures. For the year, cost of goods sold increased 9 percent. This reflects a 4 percent increase in concentrate sales, a 4 percent increase from currency and increases in commodity-based input and freight costs, partially offset by a 2 percent decrease from structural changes primarily related to bottling acquisitions and divestitures.
Selling, general and administrative expenses decreased 10 percent for the quarter and increased 8 percent for the year reflecting a 6 percent decrease and a 4 percent increase from currency in the quarter and full year, respectively. The Company continued to realize expense leverage by investing in marketing strategies to drive brand growth and by more effectively managing general and administrative expenses.
The Company had other operating charges in the fourth quarter and full year totaling $108 million and $350 million pre-tax, respectively, primarily related to restructuring costs, productivity initiatives, asset impairments and contract termination fees.
Operating income increased 12 percent for the quarter and 16 percent for the year. After considering items impacting comparability, operating income grew 10 percent for the quarter and 17 percent for the year. Currency negatively impacted comparable operating income by 9 percent in the quarter, but benefited it 6 percent for the year. Based on the anticipated benefits of hedging coverage in place, the Company currently expects currencies to have an estimated 10 to 12 percent negative impact on operating income in the first quarter of 2009.
Effective Tax Rate
The reported effective tax rates for the quarter and the year were 13.5 percent and 21.9 percent, respectively. The underlying effective tax rate on operations for the quarter and year 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 2009 will be approximately 23.0 to 24.0 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.
New Operating Structure
As previously communicated, effective July 1, 2008, the Company made certain changes to its operating structure to realign 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 and 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 began in the third quarter. Reclassified operating segment information can be found in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2008.
Items Impacting Prior Year Results
In 2007, the fourth quarter results included a net charge of $0.06 primarily related to restructuring charges and asset write-downs. Third quarter 2007 results included a $0.03 per share charge primarily related to restructuring charges which was offset by a $0.03 per share gain primarily related to the sale of a portion of the Company's investment in Coca-Cola Amatil Limited. Second quarter 2007 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. First quarter 2007 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 fourth quarter and full year 2008 results today at 9:30 a.m. (EST). The Company invites investors to listen to the live audiocast of the conference call at the Company's website, 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 website. Further, the "Investors" section of the Company's website 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
December 31, 2008 December 31, 2007 % Change
Net Operating Revenues $ 7,126 $ 7,331 (3 )
Cost of goods sold 2,568 2,641 (3 )
Gross Profit 4,558 4,690 (3 )
Selling, general and 2,744 3,039 (10 )
administrative expenses
Other operating charges 108 125 --
Operating Income 1,706 1,526 12
Interest income 94 86 9
Interest expense 121 156 (22 )
Equity income (loss) - net (440 ) 171 --
Other income (loss) - net (89 ) (4 ) --
Income Before Income Taxes 1,150 1,623 (29 )
Income taxes 155 409 (62 )
Net Income $ 995 $ 1,214 (18 )
Diluted Net Income Per Share* $ 0.43 $ 0.52 (17 )
Average Shares Outstanding - 2,321 2,347
Diluted*
* For the three months ended December 31, "Basic Net Income Per Share" was
$0.43 for 2008 and $0.52 for 2007 based on "Average Shares Outstanding - Basic"
of 2,312 for 2008 and 2,314 for 2007.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
Year Ended
December 31, 2008 December 31, 2007 % Change
Net Operating Revenues $ 31,944 $ 28,857 11
Cost of goods sold 11,374 10,406 9
Gross Profit 20,570 18,451 11
Selling, general and 11,774 10,945 8
administrative expenses
Other operating charges 350 254 --
Operating Income 8,446 7,252 16
Interest income 333 236 41
Interest expense 438 456 (4 )
Equity income (loss) - net (874 ) 668 --
Other income (loss) - net (28 ) 173 --
Income Before Income Taxes 7,439 7,873 (6 )
Income taxes 1,632 1,892 (14 )
Net Income $ 5,807 $ 5,981 (3 )
Diluted Net Income Per Share* $ 2.49 $ 2.57 (3 )
Average Shares Outstanding - 2,336 2,331
Diluted*
* For the year ended December 31, "Basic Net Income Per Share" was $2.51 for
2008 and $2.59 for 2007 based on "Average Shares Outstanding - Basic" of 2,315
for 2008 and 2,313 for 2007.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(UNAUDITED)
(In millions except par value)
December 31, 2008 December 31, 2007
Assets
Current Assets
Cash and cash equivalents $ 4,701 $ 4,093
Marketable securities 278 215
Trade accounts receivable, less allowances 3,090 3,317
of $51 and $56, respectively
Inventories 2,187 2,220
Prepaid expenses and other assets 1,920 2,260
Total Current Assets 12,176 12,105
Investments
Equity method investments 5,316 7,289
Other investments, principally bottling 463 488
companies
Total Investments 5,779 7,777
Other Assets 1,733 2,675
Property, Plant and Equipment - net 8,326 8,493
Trademarks With Indefinite Lives 6,059 5,153
Goodwill 4,029 4,256
Other Intangible Assets 2,417 2,810
Total Assets $ 40,519 $ 43,269
Liabilities and Shareowners' Equity
Current Liabilities
Accounts payable and accrued expenses $ 6,205 $ 6,915
Loans and notes payable 6,066 5,919
Current maturities of long-term debt 465 133
Accrued income taxes 252 258
Total Current Liabilities 12,988 13,225
Long-Term Debt 2,781 3,277
Other Liabilities 3,401 3,133
Deferred Income Taxes 877 1,890
Shareowners' Equity
Common stock, $0.25 par value; Authorized
- 5,600 shares; Issued - 3,519 shares and 880 880
3,519 shares, respectively
Capital surplus 7,966 7,378
Reinvested earnings 38,513 36,235
Accumulated other comprehensive income (2,674 ) 626
(loss)
Treasury stock, at cost - 1,207 and 1,201 (24,213 ) (23,375 )
shares, respectively
Total Shareowners' Equity 20,472 21,744
Total Liabilities and Shareowners' Equity $ 40,519 $ 43,269
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
(In millions)
Year Ended
December 31, 2008 December 31, 2007
Operating Activities
Net income $ 5,807 $ 5,981
Depreciation and 1,228 1,163
amortization
Stock-based compensation expense 266 313
Deferred income (360 ) 109
taxes
Equity income or loss, net of dividends 1,128 (452 )
Foreign currency (42 ) 9
adjustments
Gains on sales of assets, including (130 ) (244 )
bottling interests
Other operating 209 166
charges
Other items 153 99
Net change in operating assets and (688 ) 6
liabilities
Net cash provided by operating activities 7,571 7,150
Investing Activities
Acquisitions and investments, principally
beverage and bottling companies and (759 ) (5,653 )
trademarks
Purchases of other (240 ) (99 )
investments
Proceeds from disposals of other 479 448
investments
Purchases of property, plant and (1,968 ) (1,648 )
equipment
Proceeds from disposals of property, 129 239
plant and equipment
Other investing (4 ) (6 )
activities
Net cash used in investing activities (2,363 ) (6,719 )
Financing Activities
Issuances of debt 4,337 9,979
Payments of debt (4,308 ) (5,638 )
Issuances of stock 586 1,619
Purchases of stock (1,079 ) (1,838 )
for treasury
Dividends (3,521 ) (3,149 )
Net cash (used in) provided by financing (3,985 ) 973
activities
Effect of Exchange
Rate Changes on
Cash and Cash (615 ) 249
Equivalents
Cash and Cash
Equivalents
Net increase during 608 1,653
the year
Balance at beginning 4,093 2,440
of year
Balance at end of $ 4,701 $ 4,093
year
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
December December December December December December
31, 2008 31, 2007 % Fav. / 31, 2008 31, 2007 % Fav. / 31, 2008 31, 2007 % Fav. /
(Unfav.) (Unfav.) (Unfav.)
(1) (5) (2) (6) (2), (3), (6), (7),
(4) (8)
Eurasia & $ 507 $ 579 (12 ) $ 158 $ 188 (16 ) $ 151 $ 196 (23 )
Africa
Europe 1,175 1,214 (3 ) 628 549 14 602 545 10
Latin 941 911 3 503 491 2 491 495 (1 )
America
North 1,974 1,886 5 411 402 2 404 402 0
America
Pacific 1,091 1,091 0 375 393 (5 ) 370 377 (2 )
Bottling 1,832 2,104 (13 ) 25 22 14 (388 ) 199 --
Investments
Corporate 16 23 (30 ) (394 ) (519 ) 24 (480 ) (591 ) 19
Eliminations (410 ) (477 ) -- -- -- -- -- -- --
Consolidated $ 7,126 $ 7,331 (3 ) $ 1,706 $ 1,526 12 $ 1,150 $ 1,623 (29 )
Note: Refer to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2008 for more information on the changes to the Company's operating structure.
(1) Intersegment revenues for the three months ended December 31, 2008 were approximately $33 million for Eurasia and Africa, $206 million for Europe, $48 million for Latin America, $28 million for North America, $65 million for Pacific and $30 million for Bottling Investments.
(2) Operating income (loss) and income (loss) before income taxes for the three months ended December 31, 2008 were reduced by approximately $1 million for Eurasia and Africa, $44 million for North America, $21 million for Bottling Investments and $42 million for Corporate, primarily as a result of restructuring costs, productivity initiatives, asset impairments and contract termination fees.
(3) Income (loss) before income taxes for the three months ended December 31, 2008 was reduced by approximately $19 million for Europe, $8 million for North America and $529 million for Bottling Investments, primarily attributable to our proportionate share of asset impairment charges recorded by equity method investees.
(4) Income (loss) before income taxes for the three months ended December 31, 2008 was reduced by approximately $2 million for North America, $30 million for Bottling Investments and $52 million for Corporate, primarily due to other-than-temporary impairments of available-for-sale securities.
(5) Intersegment revenues for the three months ended December 31, 2007 were approximately $34 million for Eurasia and Africa, $230 million for Europe, $71 million for Latin America, $12 million for North America, $112 million for Pacific and $18 million for Bottling Investments.
(6) Operating income (loss) and income (loss) before income taxes for the three months ended December 31, 2007 were reduced by approximately $2 million for Eurasia and Africa, $21 million for Europe, $1 million for Latin America, $10 million for North America, $2 million for Pacific, $4 million for Bottling Investments and $86 million for Corporate, primarily as a result of asset impairments and restructuring costs.
(7) Income (loss) before income taxes for the three months ended December 31, 2007 was increased by approximately $18 million for Corporate due to the sale of real estate in the United States.
(8) Income (loss) before income taxes for the three months ended December 31, 2007 was reduced by approximately $9 million for Bottling Investments. The reduction was primarily due to our proportionate share of asset impairments and restructuring charges recorded by equity method investees, partially offset by our proportionate share of tax benefits recorded by CCE.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Year Ended
Net Operating Revenues Operating Income (Loss) Income (Loss) Before Income
Taxes
December December December December December December
31, 2008 31, 2007 % Fav. / 31, 2008 31, 2007 % Fav. / 31, 2008 31, 2007 % Fav. /
(Unfav.) (Unfav.) (Unfav.)
(1) (6) (2) (7) (2), (3), (7), (8),
(4), (5) (9)
Eurasia & $ 2,327 $ 2,109 10 $ 834 $ 667 25 $ 811 $ 696 17
Africa
Europe 5,801 5,292 10 3,175 2,775 14 3,182 2,796 14
Latin 3,835 3,244 18 2,099 1,749 20 2,082 1,752 19
America
North 8,280 7,836 6 1,584 1,696 (7 ) 1,587 1,700 (7 )
America
Pacific 4,695 4,406 7 1,858 1,699 9 1,836 1,665 10
Bottling 8,931 7,695 16 264 153 73 (625 ) 761 --
Investments
Corporate 107 72 49 (1,368 ) (1,487 ) 8 (1,434 ) (1,497 ) 4
Eliminations (2,032 ) (1,797 ) -- -- -- -- -- -- --
Consolidated $ 31,944 $ 28,857 11 $ 8,446 $ 7,252 16 $ 7,439 $ 7,873 (6 )
Note: Refer to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2008 for more information on the changes to the Company's operating structure.
(1) Intersegment revenues for the year ended December 31, 2008 were approximately $192 million for Eurasia and Africa, $1,016 million for Europe, $212 million for Latin America, $75 million for North America, $337 million for Pacific and $200 million for Bottling Investments.
(2) Operating income (loss) and income (loss) before income taxes for the year ended December 31, 2008 were reduced by approximately $1 million for Eurasia and Africa, $1 million for Latin America, $56 million for North America, $46 million for Bottling Investments and $246 million for Corporate, primarily as a result of restructuring costs, contract termination fees, productivity initiatives and asset impairments.
(3) Income (loss) before income taxes for the year ended December 31, 2008 was reduced by approximately $19 million for Europe, $8 million for North America and $1,659 million for Bottling Investments, primarily attributable to our proportionate share of asset impairment charges recorded by equity method investees.
(4) Income (loss) before income taxes for the year ended December 31, 2008 was increased by approximately $119 million for Bottling Investments and Corporate, primarily due to the gain on the sale of Refrigerantes Minas Gerais Ltda. ("Remil"), a bottler in Brazil, to
Coca-Cola FEMSA, S.A.B. de C.V. and the sale of 49 percent of our interest in Coca-Cola Beverages Pakistan Ltd. to Coca-Cola Icecek A.S.
(5) Income (loss) before income taxes for the year ended December 31, 2008 was reduced by approximately $2 million for North America, $30 million for Bottling Investments and $52 million for Corporate, primarily due to other-than-temporary impairments of available-for-sale securities.
(6) Intersegment revenues for the year ended December 31, 2007 were $168 million for Eurasia and Africa, $845 million for Europe, $175 million for Latin America, $75 million for North America, $409 million for Pacific and $125 million for Bottling Investments.
(7) Operating income (loss) and income (loss) before income taxes for the year ended December 31, 2007 were reduced by approximately $37 million for Eurasia and Africa, $33 million for Europe, $4 million for Latin America, $23 million for North America, $3 million for Pacific, $47 million for Bottling Investments and $121 million for Corporate, primarily as a result of asset impairments and restructuring costs.
(8) Income (loss) before income taxes for the year ended December 31, 2007 was reduced by approximately $150 million for Bottling Investments, primarily due to our proportionate share of asset impairments charges and restructuring expenses recorded by equity method investees.
(9) Income (loss) before income taxes for the year ended December 31, 2007 was increased by approximately $227 million for Corporate, primarily due to the sale of real estate in Spain, the sale of our equity ownership in Vonpar Refrescos S.A. and the sale of Coca-Cola Amatil Limited shares.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Financial Measures
(UNAUDITED)
Three Months Ended December 31, 2008
Items Impacting Comparability
After
Considering % Change -
Reported Asset Item% Change After
(GAAP) Impairments/ Productivity Equity Transaction Certain Tax - Considering
Initiatives Investees Gains Matters (1) (NonReported Items
Restructuring (GAAP)
(Non-GAAP)
Net Operating $ 7,126 $ 7,126 (3 ) (2 ) (3 )
Revenues
Cost of goods 2,568 2,568 (3 ) (3 )
sold
Gross Profit 4,558 4,558 (3 ) (3 )
Selling,
general and 2,744 2,744 (10 ) (10 )
administrative
expenses
Other
operating 108 ($77 ) ($31 ) - -- --
charges
Operating 1,706 77 31 1,814 12 10 (3 )
Income
Interest 94 94 9 9
income
Interest 121 121 (22 ) (22 )
expense
Equity income (440 ) $ 556 116 -- (36 )
(loss) - net
Other income (89 ) 84 ($1 ) (6 ) -- --
(loss) - net
Income Before 1,150 161 31 556 (1 ) 1,897 (29 ) 9
Income Taxes
Income taxes 155 23 12 197 - $ 31 418 (62 ) 9
Net Income $ 995 $ 138 $ 19 $ 359 ($1 ) ($31 ) $ 1,479 (18 ) 9
Diluted Net
Income Per $ 0.43 $ 0.06 $ 0.01 $ 0.15 $ 0.00 ($0.01 ) $ 0.64 (17 ) 10
Share
Average Shares
Outstanding - 2,321 2,321 2,321 2,321 2,321 2,321 2,321
Diluted
Gross Margin 64.0 % 64.0 %
Operating 23.9 % 25.5 %
Margin
Effective Tax 13.5 % 22.0 %
Rate
Three Months Ended December 31, 2007
Items Impacting Comparability
After
Reported Asset Considering
(GAAP) Impairments/ Equity Gains on Certain Tax Items
Investees Sales of Matters (1)
Restructuring Assets (Non-GAAP)
Net Operating $ 7,331 $ 7,331
Revenues
Cost of goods 2,641 ($1 ) 2,640
sold
Gross Profit 4,690 1 4,691
Selling,
general and 3,039 3,039
administrative
expenses
Other
operating 125 (125 ) -
charges
Operating 1,526 126 1,652
Income
Interest 86 86
income
Interest 156 156
expense
Equity income 171 $ 9 180
- net
Other income (4 ) ($18 ) (22 )
(loss) - net
Income Before 1,623 126 9 (18 ) 1,740
Income Taxes
Income taxes 409 19 2 (7 ) ($40 ) 383
Net Income $ 1,214 $ 107 $ 7 ($11 ) $ 40 $ 1,357
Diluted Net
Income Per $ 0.52 $ 0.05 $ 0.00 $ 0.00 $ 0.02 $ 0.58 (4)
Share
Average Shares
Outstanding - 2,347 2,347 2,347 2,347 2,347 2,347
Diluted
Gross Margin 64.0 % 64.0 %
Operating 20.8 % 22.5 %
Margin
Effective Tax 25.2 % 22.0 %
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 $ 7,126 $ 7,331 (3 )
revenues
Structural - (262 ) --
changes
Net operating
revenues
excluding $ 7,126 $ 7,069 1
structural
changes
(3) Operating income after considering items impacting comparability for the three months ended December 31, 2008 includes a
negative currency impact of approximately 9%.
Currency neutral operating income growth after considering items impacting comparability is 19%.
(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 Tables above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended December 31, 2008 and December 31, 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)
Year Ended December 31, 2008
% Change -
Items Impacting Comparability % Change After
After - Considering
Reported Asset Considering Reported Items
(GAAP) Impairments/ Productivity Equity Transaction Certain Tax Items (GAAP)
Initiatives Investees Gains Matters (1) (Non-GAAP)
Restructuring (Non-GAAP)
Net Operating $ 31,944 $ 31,944 11 (2 ) 11
Revenues
Cost of goods 11,374 11,374 9 9
sold
Gross Profit 20,570 20,570 11 11
Selling,
general and 11,774 11,774 8 8
administrative
expenses
Other
operating 350 ($295 ) ($55 ) - -- --
charges
Operating 8,446 295 55 8,796 16 17 (3 )
Income
Interest 333 333 41 41
income
Interest 438 438 (4 ) (4 )
expense
Equity income (874 ) $ 1,686 812 -- (1 )
(loss) - net
Other income (28 ) 84 ($119 ) (63 ) -- --
(loss) - net
Income Before 7,439 379 55 1,686 (119 ) 9,440 (6 ) 17
Income Taxes
Income taxes 1,632 66 21 392 (29 ) ($5 ) 2,077 (14 ) 17
Net Income $ 5,807 $ 313 $ 34 $ 1,294 ($90 ) $ 5 $ 7,363 (3 ) 17
Diluted Net
Income Per $ 2.49 $ 0.13 $ 0.01 $ 0.55 ($0.04 ) $ 0.00 $ 3.15 (4 ) (3 ) 17
Share
Average Shares
Outstanding - 2,336 2,336 2,336 2,336 2,336 2,336 2,336
Diluted
Gross Margin 64.4 % 64.4 %
Operating 26.4 % 27.5 %
Margin
Effective Tax 21.9 % 22.0 %
Rate
Year Ended December 31, 2007
Items Impacting Comparability
After
Reported Asset Considering
(GAAP) Impairments/ Equity Gains on Certain Tax Items
Investees Sales of Matters (1)
Restructuring Assets (Non-GAAP)
Net Operating $ 28,857 $ 28,857
Revenues
Cost of goods 10,406 ($14 ) 10,392
sold
Gross Profit 18,451 14 18,465
Selling,
general and 10,945 10,945
administrative
expenses
Other
operating 254 (254 ) -
charges
Operating 7,252 268 7,520
Income
Interest 236 236
income
Interest 456 456
expense
Equity income 668 $ 150 818
- net
Other income 173 ($227 ) (54 )
(loss) - net
Income Before 7,873 268 150 (227 ) 8,064
Income Taxes
Income taxes 1,892 49 21 (111 ) ($77 ) 1,774
Net Income $ 5,981 $ 219 $ 129 ($116 ) $ 77 $ 6,290
Diluted Net
Income Per $ 2.57 $ 0.09 $ 0.06 ($0.05 ) $ 0.03 $ 2.70
Share
Average Shares
Outstanding - 2,331 2,331 2,331 2,331 2,331 2,331
Diluted
Gross Margin 63.9 % 64.0 %
Operating 25.1 % 26.1 %
Margin
Effective Tax 24.0 % 22.0 %
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 $ 31,944 $ 28,857 11
revenues
Structural (912 ) (816 ) --
changes
Net operating
revenues
excluding $ 31,032 $ 28,041 11
structural
changes
(3) Operating income after considering items impacting comparability for the year ended December 31, 2008 includes a positive currency
impact of approximately 6%.
Currency neutral operating income growth after considering items impacting comparability is 11%.
(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 Tables above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the twelve months ended December 31, 2008 and December 31, 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 nearly 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 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 nearly 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 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 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 or work stoppages; increase in the cost of energy; increase in cost, disruption of supply or shortage of raw and packaging 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 general economic conditions in the United States; 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 February 12, 2009