The Coca-Cola Company 2009 Second Quarter and Year-to-Date Results
Today, our Company reports continued growth in unit case volume, which drove global gains in volume and value share, as well as continued year-to-date growth in line with our long-term revenue and profit targets.
Strong worldwide unit case volume growth of 4 percent in the quarter and 3 percent year-to-date; international unit case volume growth of 5 percent in the quarter and 4 percent year-to-date. Global volume and value share gains continued, with gains across most key markets and categories. Year-to-date reported operating income down 6 percent. Year-to-date comparable currency neutral operating income growth of 9 percent, exceeding our long-term growth target. Second quarter reported EPS was $0.88, up 44 percent versus prior year. Comparable EPS was $0.92, down 9 percent versus prior year reflecting negative currency impact. Strong cash generation, with year-to-date cash from operations increasing 14 percent. Productivity initiatives on track to achieve $500 million in annualized savings by year-end 2011; with plans to deliver more than half of the savings by year-end 2009.
ATLANTA--(BUSINESS WIRE)-- Today, The Coca-Cola Company reports healthy second quarter 2009 operating results with unit case volume increasing 4 percent, successfully cycling 3 percent growth in the prior year quarter. Internationally, we achieved broad-based unit case volume growth of 5 percent, cycling 5 percent growth in the prior year quarter. In the quarter, unit case volume growth increased strongly in key emerging markets with 33 percent growth in India and 14 percent growth in China. We realized sound unit case volume growth in other key markets around the world including Japan, Brazil, Mexico, Argentina, Thailand, Korea and Northwest Europe.
Globally, we gained volume and value share in nonalcoholic ready-to-drink beverages for the eighth consecutive quarter. Through our global Open Happiness campaign, we continue to grow brand Coca-Cola, up 3 percent in the quarter. Notably, brand Coca-Cola growth was strong across both developed and emerging markets including 3 percent growth in Mexico, 5 percent growth in Japan, 6 percent growth in China and 29 percent growth in India. Sparkling beverage unit case volume increased 2 percent in the quarter, with international sparkling beverage unit case volume increasing 4 percent, cycling 2 percent growth. Still beverage unit case volume increased 8 percent in the quarter, led by sound growth across the portfolio, including juices and juice drinks, sports drinks, teas and water brands. Still beverage unit case volume increased 12 percent internationally and 1 percent in North America.
"We continue to deliver solid operating performance," said Muhtar Kent, chairman and chief executive officer, The Coca-Cola Company. "In the first half of the year, we delivered volume and profit results in line with our long-term growth targets, despite very challenging global economic conditions. We outperformed the nonalcoholic ready-to-drink industry in most of our key markets and drove further global volume and value share gains. Our consistent strategies are working, and together with our productivity efforts, we are prudently focused on investing in the long-term growth of our resilient business. Our investments in key growth markets contributed to the good performance in China, Mexico, India and Brazil. And, with our disciplined approach to productivity initiatives, we remain on track to achieve our $500 million target in annualized savings by 2011 and expect to deliver more than half of the savings by the end of this year."
"We have also begun rolling out our 2020 Vision, the roadmap for winning together with our worldwide bottling partners. Our 2020 Vision roadmap is bringing new clarity and focus to our global business and is ensuring that our system is ideally positioned to make the most of the abundant opportunities ahead of us. We believe our unique global franchise model is the best way to win in the market, while providing sustainable profitable growth for our customers and shareowners. Our priorities remain centered on superior execution to drive value for today while strategically investing in growth for tomorrow. Over the next decade, we expect to see a global economy inevitably strengthened by attractive demographic shifts, rapid urbanization, renewed entrepreneurial energy and improved consumer sentiment. These trends bode well for the future of The Coca-Cola Company and our system."
FINANCIAL HIGHLIGHTS
Our reported operating income decreased 9 percent in the quarter versus the second quarter of 2008. Items impacting comparability reduced second quarter operating income by $72 million in 2009 and by $110 million in 2008. After considering these items, operating income was down 10 percent in the quarter. As in the first quarter, the relative strength of the U.S. dollar continued to impact our results. Excluding the impact of currency, operating income increased 4 percent in the quarter on a comparable basis. Year-to-date 2009, reported operating income decreased 6 percent, while comparable currency neutral operating income increased 9 percent, exceeding our long-term growth target.
For the second quarter of 2009, we are reporting earnings per share of $0.88, a 44 percent increase versus the second quarter of 2008. Reported earnings per share for the second quarter of 2009 and 2008 included a net charge of $0.04 and $0.40 per share, respectively, primarily related to charges recorded by our equity method investees, restructuring charges and asset write-downs. After considering the items impacting comparability, earnings per share in the quarter were $0.92, a decrease of 9 percent versus the second quarter of 2008. Year-to-date 2009, reported earnings per share increased 18 percent, while comparable earnings per share decreased 7 percent. Earnings per share continue to be negatively impacted by the relative strength of the U.S. dollar versus other currencies around the world.
OPERATING REVIEW
Three Months Ended July 3, 2009
% Favorable / (Unfavorable)
Comparable
Currency
Unit Case Operating
Net Revenues Neutral
Volume Income
Operating
Income
Total Company 4 (9) (9) 4
Eurasia & Africa 7 (8) (10) 9
Europe 1 (17) (15) 0
Latin America 6 (6) (11) 12
North America (1) (2) 0 1
Pacific 6 0 (2) (2)
Bottling Investments (3) (17) (22) 13
Six Months Ended July 3, 2009
% Favorable / (Unfavorable)
Comparable
Currency
Unit Case Operating
Net Revenues Neutral
Volume Income
Operating
Income
Total Company 3 (6) (6) 9
Eurasia & Africa 5 (9) (9) 13
Europe (1) (15) (11) 3
Latin America 6 (6) (11) 13
North America (2) 3 13 15
Pacific 5 6 6 4
Bottling Investments (4) (15) (69) 10
Eurasia & Africa
-- Our Eurasia and Africa Group's unit case volume increased 7 percent in
the quarter, successfully cycling 6 percent growth in the prior year
quarter. Year-to-date, unit case volume increased 5 percent, cycling 6
percent growth in the prior year. Net revenues for the quarter decreased
8 percent, reflecting a double-digit negative impact from currencies,
partially offset by positive pricing and mix and a 2 percent increase in
concentrate sales. Operating income in the quarter decreased 10 percent,
reflecting the decrease in net revenues primarily related to currency,
and the continued investment in key marketing and business initiatives.
-- Eurasia and Africa delivered solid unit case volume growth, with
sparkling beverages increasing 6 percent and still beverages increasing
13 percent in the quarter. Unit case volume increased across most
markets in the quarter, led by India increasing 33 percent, cycling 6
percent growth in the prior year. India gained volume and value share in
both sparkling and still beverages. Southern Eurasia increased unit case
volume 5 percent in the quarter, cycling 11 percent growth in the prior
year.
-- In the quarter, unit case volume growth was even in South Africa,
increased 9 percent in Nigeria, increased 15 percent in Pakistan and
increased 4 percent in Turkey. Russia's unit case volume declined 9
percent in the quarter, reflecting the impact of a continued challenging
macroeconomic environment.
Europe
-- Our Europe Group's unit case volume increased 1 percent in the quarter,
cycling even volume performance in the prior year quarter, reflecting a
challenging macroeconomic environment. Year-to-date, unit case volume
decreased 1 percent, cycling 2 percent growth in the prior year. Net
revenues for the quarter decreased 17 percent, primarily driven by a
double-digit negative impact from currencies and a 2 percent decrease in
concentrate sales, partially offset by positive pricing and mix.
Operating income decreased 15 percent reflecting the impact of the lower
net revenues, primarily related to currency, partially offset by tight
expense control.
-- Unit case volume growth in Northwest Europe was partially offset by
weakness in Spain and Eastern Europe due to significant macroeconomic
challenges in those regions.
-- In the quarter, Europe gained value share, and volume and value share
across key countries.
Latin America
-- Our Latin America Group continued to deliver strong unit case volume
growth of 6 percent in the quarter, successfully cycling 7 percent
growth in the prior year quarter. Year-to-date, unit case volume
increased 6 percent, cycling 8 percent growth in the prior year. Net
revenues for the quarter decreased 6 percent, primarily due to a
double-digit negative impact from currencies, partially offset by an 8
percent increase in concentrate sales and positive pricing and mix.
Operating income for the quarter decreased 11 percent reflecting the net
revenue decrease, primarily related to currency, and continuing
investment in key marketing and business initiatives.
-- Strong unit case volume growth of 6 percent in the quarter was led by a
6 percent increase in Mexico, a 5 percent increase in Brazil and a 6
percent increase in Argentina.
-- Latin America delivered growth across the portfolio with sparkling
beverages increasing 3 percent and still beverages increasing 24 percent
for the quarter. Notably brand Coca-Cola grew 4 percent and Trademark
Coca-Cola grew 3 percent in the quarter.
North America
-- Our North America Group's unit case volume declined 1 percent in the
quarter primarily due to the continuing difficult macroeconomic
environment partially offset by holiday shifts into the quarter and
strong customer and consumer programs. In the quarter, Retail unit case
volume declined 4 percent, while Foodservice and Hospitality unit case
volume increased 7 percent, due to strong growth in still beverages
through tea, coffee and smoothies, as well as improving trends in
sparkling beverages. Year-to-date, unit case volume decreased 2 percent,
cycling even volume growth in the prior year. Net revenues for the
quarter decreased 2 percent, reflecting a 1 percent decrease in
concentrate sales and a 1 percent negative currency impact. Operating
income was even in the quarter reflecting tight expense control and a
benefit from productivity initiatives.
-- North America grew volume share slightly in the quarter and gained
significant value share for the third consecutive quarter.
-- Though integrated marketing programs positively impacted sparkling
beverages and improved brand health, unit case volume for sparkling
beverages declined 2 percent in the quarter reflecting industry-leading
bottler pricing. Importantly, Coca-Cola Zero unit case volume grew 24
percent in the quarter, delivering more than 12 consecutive quarters of
double-digit growth.
-- Still beverage unit case volume increased 1 percent in the quarter, led
by strong performance in our Foodservice and Hospitality business.
Strong share performance of Fuze, glaceau and Trademark Simply led to
share gains for the eighth consecutive quarter. Additionally, the
performance of these premium brands delivered significant value share
gains in the quarter.
Pacific
-- Our Pacific Group delivered unit case volume growth of 6 percent in the
quarter, successfully cycling 5 percent growth in the prior year
quarter. Year-to-date, unit case volume growth increased 5 percent,
cycling 7 percent growth in the prior year. Net revenues for the quarter
were even, reflecting an 8 percent increase in concentrate sales offset
by negative country mix. Operating income for the quarter decreased 2
percent reflecting even net revenues and continued investments in key
business initiatives and marketing efficiencies.
-- Pacific delivered unit case volume growth across the portfolio with
sparkling beverages increasing 7 percent and still beverages increasing
5 percent in the quarter. Importantly, Trademark Coca-Cola grew 6
percent in the quarter.
-- In China, unit case volume grew 14 percent in the second quarter driven
by double-digit growth in Trademark Sprite and Minute Maid as well as
high single-digit growth in Trademark Coca-Cola, contributing to volume
and value share gains across sparkling and still beverages.
-- In Japan, unit case volume growth was 2 percent in the quarter and
continued to outperform the nonalcoholic ready-to-drink industry
resulting in the fifth consecutive quarter of share gains. Sparkling
beverage unit case volume grew 6 percent in the quarter, led by
Trademark Coca-Cola with unit case volume growth of 10 percent. Still
beverage unit case volume growth of 1 percent was driven by unit case
volume growth of 9 percent in Sokenbicha partially offset by a unit case
volume decline in Georgia Coffee. Due to the weak economy, Georgia
Coffee was negatively impacted by shifts away from the at-work vending
channel.
Bottling Investments
-- Our Bottling Investments Group's unit case volume decreased 3 percent in
the quarter, reflecting bottling divestitures in the prior year
partially offset by organic growth. Net revenues decreased 17 percent in
the quarter reflecting prior year divestitures, a double-digit negative
currency impact and negative mix. Operating income declined 22 percent
primarily driven by the prior year divestitures and a double-digit
negative currency impact, partially offset by tight expense control.
FINANCIAL REVIEW
Net operating revenues for the second quarter decreased 9 percent, primarily driven by a 9 percent negative currency impact, a 2 percent negative impact from structural changes and a 1 percent negative impact from pricing and mix, offset by a 3 percent increase in concentrate sales. Structural changes relate to the divestiture of certain bottling operations in 2008. Excluding the impact of these divestitures, our comparable currency neutral net operating revenues increased 6 percent year-to-date, in line with our long-term growth target.
Cost of goods sold decreased 8 percent for the quarter. This decrease is primarily driven by a 3 percent increase in concentrate sales offset by a 5 percent decrease from currencies and a 3 percent decrease from structural changes related to bottling investments.
Selling, general and administrative expenses decreased 8 percent in the quarter primarily driven by an 8 percent negative currency impact. The positive impact from prior year divestitures was offset by the impact of lower incentive costs in the prior year and the timing of certain corporate expenses in the current quarter.
Second quarter operating income decreased 9 percent versus 2008. Items impacting comparability reduced second quarter operating income by $72 million in 2009 and by $110 million in 2008 and were related to restructuring costs, productivity initiatives and asset impairments. After considering items impacting comparability, operating income was down 10 percent for the quarter. Currency negatively impacted comparable operating income by 14 percent in the quarter. For the third quarter of 2009, we expect currencies to have an estimated 12 to 14 percent negative impact on operating income, including the anticipated benefits of our hedging coverage and the exchange rates we are cycling in the prior year. In addition, we currently expect currencies to have a low single-digit negative impact on operating income in the fourth quarter.
Cash from operations was $3.7 billion year-to-date compared with $3.2 billion in the prior year period, an increase of 14 percent. This increase was driven by an improvement in working capital versus the prior year.
Effective Tax Rate
The reported effective tax rate for the quarter was 24.9 percent. The underlying effective tax rate on operations for the quarter was 23.5 percent. The variance between the reported rate and the underlying rate was due to the tax impact of various separately disclosed items impacting comparability.
We estimate that our underlying effective tax rate on operations for the full year 2009 will be approximately 23.5 percent. Our estimated underlying effective tax rate reflects, among other items, our best estimates of 2009 operating results and foreign currency exchange rates. If actual results are different than these estimates the underlying effective tax rate could change. This rate does not reflect the impact of discrete events, which, if and when they occur, are separately recognized in the appropriate period.
Items Impacting Prior Year Results
Second quarter 2008 results included a net charge of $0.40 per share primarily related to charges recorded by our equity method investees, restructuring charges and asset write-downs.
First quarter 2008 results included a net charge of $0.03 per share primarily related to restructuring charges and asset write-downs.
NOTES
-- All references to growth rate percentages and share compare the results
of the period to those of the prior year comparable period.
-- All references to unit case volume percentage changes are computed based
on average daily sales for all periods presented.
-- 2009 year-to-date results are positively impacted by five additional
selling days, which will be offset by six fewer selling days in the
fourth quarter.
-- Our long-term profit targets are on a comparable currency neutral basis.
CONFERENCE CALL
We are hosting a conference call with investors and analysts to discuss our 2009 second quarter and year-to-date results today at 9:30 a.m. (EDT). We invite investors to listen to the live audiocast of the conference call at our website, http://www.thecoca-colacompany.com/investors/index.html in the "Investors" section. A replay in downloadable MP3 format will also be available within 24 hours after the audiocast on our website. Further, the "Investors" section of our website includes a reconciliation of non-GAAP financial measures that may be used periodically by management when discussing our financial results with investors and analysts to our results as reported under GAAP.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
Three Months Ended
July 3, 2009 June 27, 2008 % Change
Net Operating Revenues $ 8,267 $ 9,046 (9 )
Cost of goods sold 2,913 3,162 (8 )
Gross Profit 5,354 5,884 (9 )
Selling, general and administrative 2,844 3,095 (8 )
expenses
Other operating charges 72 110 --
Operating Income 2,438 2,679 (9 )
Interest income 57 69 (17 )
Interest expense 97 89 9
Equity income (loss) - net 310 (843 ) --
Other income (loss) - net 20 101 --
Income Before Income Taxes 2,728 1,917 42
Income taxes 679 474 43
Consolidated Net Income 2,049 1,443 42
Less: Net income attributable to 12 21 (43 )
noncontrolling interests
Net Income Attributable to Shareowners $ 2,037 $ 1,422 43
of The Coca-Cola Company
Diluted Net Income Per Share* $ 0.88 $ 0.61 44
Average Shares Outstanding - Diluted* 2,323 2,343
* For the three months ended July 3, 2009 and June 27, 2008, "Basic Net Income
Per Share" was $0.88 for 2009 and $0.61 for 2008 based on "Average Shares
Outstanding - Basic" of 2,313 and 2,316 for 2009 and 2008. Basic net income per
share and diluted net income per share are calculated based on net income
attributable to shareowners of The Coca-Cola Company.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
Six Months Ended
July 3, 2009 June 27, 2008 % Change
Net Operating Revenues $ 15,436 $ 16,425 (6 )
Cost of goods sold 5,503 5,786 (5 )
Gross Profit 9,933 10,639 (7 )
Selling, general and administrative 5,468 5,891 (7 )
expenses
Other operating charges 164 195 --
Operating Income 4,301 4,553 (6 )
Interest income 117 134 (13 )
Interest expense 182 206 (12 )
Equity income (loss) - net 327 (706 ) --
Other income (loss) - net (20 ) 101 --
Income Before Income Taxes 4,543 3,876 17
Income taxes 1,135 922 23
Consolidated Net Income 3,408 2,954 15
Less: Net income attributable to 23 32 (28 )
noncontrolling interests
Net Income Attributable to Shareowners $ 3,385 $ 2,922 16
of The Coca-Cola Company
Diluted Net Income Per Share* $ 1.46 $ 1.24 18
Average Shares Outstanding - Diluted* 2,319 2,349
* For the six months ended July 3, 2009 and June 27, 2008, "Basic Net Income Per
Share" was $1.46 for 2009 and $1.26 for 2008 based on "Average Shares
Outstanding - Basic" of 2,313 and 2,319 for 2009 and 2008. Basic net income per
share and diluted net income per share are calculated based on net income
attributable to shareowners of The Coca-Cola Company.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(UNAUDITED)
(In millions except par value)
July 3, 2009 December 31, 2008
Assets
Current Assets
Cash and cash equivalents $ 7,647 $ 4,701
Marketable securities 298 278
Trade accounts receivable, less allowances of 3,746 3,090
$58 and $51, respectively
Inventories 2,483 2,187
Prepaid expenses and other assets 2,198 1,920
Total Current Assets 16,372 12,176
Equity Method Investments 5,804 5,316
Other Investments, Principally Bottling 488 463
Companies
Other Assets 1,859 1,733
Property, Plant and Equipment - net 8,904 8,326
Trademarks With Indefinite Lives 6,143 6,059
Goodwill 4,092 4,029
Other Intangible Assets 2,392 2,417
Total Assets $ 46,054 $ 40,519
Liabilities and Equity
Current Liabilities
Accounts payable and accrued expenses $ 6,356 $ 6,205
Loans and notes payable 6,382 6,066
Current maturities of long-term debt 49 465
Accrued income taxes 780 252
Total Current Liabilities 13,567 12,988
Long-Term Debt 5,017 2,781
Other Liabilities 3,051 3,011
Deferred Income Taxes 902 877
The Coca-Cola Company Shareowners' Equity
Common stock, $0.25 par value; Authorized -
5,600 shares; Issued - 3,520 and 3,519 880 880
shares, respectively
Capital surplus 8,111 7,966
Reinvested earnings 39,999 38,513
Accumulated other comprehensive income (loss) (1,740 ) (2,674 )
Treasury stock, at cost - 1,205 and 1,207 (24,174 ) (24,213 )
shares, respectively
Equity Attributable to Shareowners of The 23,076 20,472
Coca-Cola Company
Equity Attributable to Noncontrolling 441 390
Interests
Total Equity 23,517 20,862
Total Liabilities and Equity $ 46,054 $ 40,519
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
(In millions)
Six Months Ended
July 3, 2009 June 27, 2008
Operating Activities
Consolidated net income $ 3,408 $ 2,954
Depreciation and amortization 585 637
Stock-based compensation expense 107 152
Deferred income taxes (83 ) (222 )
Equity income or loss, net of dividends (191 ) 856
Foreign currency adjustments 1 (43 )
Gains on sales of assets, including bottling (15 ) (111 )
interests
Other operating charges 106 159
Other items 141 34
Net change in operating assets and liabilities (397 ) (1,198 )
Net cash provided by operating activities 3,662 3,218
Investing Activities
Acquisitions and investments, principally (248 ) (621 )
beverage and bottling companies and trademarks
Purchases of other investments (17 ) (140 )
Proceeds from disposals of bottling companies and 45 387
other investments
Purchases of property, plant and equipment (980 ) (896 )
Proceeds from disposals of property, plant and 32 46
equipment
Other investing activities 4 (10 )
Net cash used in investing activities (1,164 ) (1,234 )
Financing Activities
Issuances of debt 8,058 4,317
Payments of debt (6,087 ) (2,478 )
Issuances of stock 74 459
Purchases of stock for treasury (4 ) (1,031 )
Dividends (1,899 ) (884 )
Net cash provided by financing activities 142 383
Effect of Exchange Rate Changes on Cash and Cash 306 111
Equivalents
Cash and Cash Equivalents
Net increase during the period 2,946 2,478
Balance at beginning of period 4,701 4,093
Balance at end of period $ 7,647 $ 6,571
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
July 3, June 27, July 3, June 27, July 3, June 27,
2009 2008 % Fav. / 2009 2008 % Fav. / 2009 2008 % Fav. /
(1) (4) (Unfav.) (2) (5) (Unfav.) (2), (3) (5), (6), (Unfav.)
(7)
Eurasia & $ 615 $ 667 (8 ) $ 243 $ 269 (10 ) $ 253 $ 274 (8 )
Africa
Europe 1,453 1,743 (17 ) 861 1,016 (15 ) 880 1,027 (14 )
Latin 898 960 (6 ) 472 531 (11 ) 470 537 (12 )
America
North 2,210 2,256 (2 ) 455 457 0 461 460 0
America
Pacific 1,322 1,324 0 594 604 (2 ) 587 599 (2 )
Bottling 2,242 2,701 (17 ) 122 156 (22 ) 420 (694 ) --
Investments
Corporate 35 29 21 (309 ) (354 ) 13 (343 ) (286 ) (20 )
Eliminations (508 ) (634 ) -- -- -- -- -- -- --
Consolidated $ 8,267 $ 9,046 (9 ) $ 2,438 $ 2,679 (9 ) $ 2,728 $ 1,917 42
Intersegment revenues for the three months ended July 3, 2009, were approximately $69 million for Eurasia and
(1) Africa, $242 million for Europe, $37 million for Latin America, $37 million for North America, $87 million for
Pacific and $36 million for Bottling Investments.
Operating income (loss) and income (loss) before income taxes for the three months ended July 3, 2009, were
(2) reduced by approximately $3 million for Eurasia and Africa, $1 million for Europe, $8 million for North America,
$26 million for Bottling Investments and $34 million for Corporate, primarily as a result of restructuring
costs, an asset impairment and productivity initiatives.
Income (loss) before income taxes for the three months ended July 3, 2009, was reduced by approximately $10
(3) million for Bottling Investments, primarily attributable to our proportionate share of restructuring costs
recorded by certain of our equity method investees.
Intersegment revenues for the three months ended June 27, 2008, were approximately $66 million for Eurasia and
(4) Africa, $299 million for Europe, $63 million for Latin America, $16 million for North America, $97 million for
Pacific and $93 million for Bottling Investments.
Operating income (loss) and income (loss) before income taxes for the three months ended June 27, 2008, were
(5) reduced by approximately $4 million for North America, $9 million for Bottling Investments and $97 million for
Corporate, primarily attributable to restructuring costs, contract termination fees, asset impairments and
productivity initiatives.
Income (loss) before income taxes for the three months ended June 27, 2008, was reduced by approximately $1.1
(6) billion for Bottling Investments, primarily as a result of our proportionate share of an impairment charge
recorded by Coca-Cola Enterprises Inc. ("CCE").
Income (loss) before income taxes for the three months ended June 27, 2008, was increased by approximately $102
(7) 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. ("Coca-Cola FEMSA").
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Six Months Ended
Net Operating Revenues Operating Income (Loss) Income (Loss) Before Income
Taxes
July 3, June 27, July 3, June 27, July 3, June 27,
2009 2008 % Fav. / 2009 2008 % Fav. / 2009 2008 % Fav. /
(1) (5) (Unfav.) (2) (6) (Unfav.) (2), (3), (6), (7), (Unfav.)
(4) (8)
Eurasia & $ 1,118 $ 1,228 (9 ) $ 450 $ 496 (9 ) $ 455 $ 501 (9 )
Africa
Europe 2,633 3,097 (15 ) 1,553 1,751 (11 ) 1,577 1,769 (11 )
Latin 1,758 1,861 (6 ) 926 1,037 (11 ) 927 1,044 (11 )
America
North 4,266 4,154 3 883 781 13 887 785 13
America
Pacific 2,462 2,328 6 1,050 992 6 1,040 983 6
Bottling 4,064 4,790 (15 ) 53 173 (69 ) 377 (535 ) --
Investments
Corporate 52 57 (9 ) (614 ) (677 ) 9 (720 ) (671 ) (7 )
Eliminations (917 ) (1,090 ) -- -- -- -- -- -- --
Consolidated $ 15,436 $ 16,425 (6 ) $ 4,301 $ 4,553 (6 ) $ 4,543 $ 3,876 17
Intersegment revenues for the six months ended July 3, 2009, were approximately $114 million for Eurasia and
(1) Africa, $442 million for Europe, $69 million for Latin America, $49 million for North America, $181 million for
Pacific and $62 million for Bottling Investments.
Operating income (loss) and income (loss) before income taxes for the six months ended July 3, 2009, were reduced
(2) by approximately $3 million for Eurasia and Africa, $1 million for Europe, $13 million for North America, $91
million for Bottling Investments and $56 million for Corporate, primarily as a result of restructuring costs,
asset impairments and productivity initiatives.
Income (loss) before income taxes for the six months ended July 3, 2009, was reduced by approximately $61 million
(3) for Bottling Investments and $1 million for Corporate, primarily attributable to our proportionate share of asset
impairment charges and restructuring costs recorded by certain of our equity method investees.
(4) Income (loss) before income taxes for the six months ended July 3, 2009, was reduced by approximately $27 million
for Corporate due to an other-than-temporary impairment of a cost method investment.
Intersegment revenues for the six months ended June 27, 2008, were approximately $107 million for Eurasia and
(5) Africa, $530 million for Europe, $120 million for Latin America, $30 million for North America, $188 million for
Pacific and $115 million for Bottling Investments.
Operating income (loss) and income (loss) before income taxes for the six months ended June 27, 2008, were reduced
(6) by approximately $6 million for North America, $13 million for Bottling Investments and $176 million for
Corporate, primarily attributable to restructuring costs, contract termination fees, asset impairments and
productivity initiatives.
Income (loss) before income taxes for the six months ended June 27, 2008, was reduced by approximately $1.1
(7) billion for Bottling Investments, primarily as a result of our proportionate share of an impairment charge
recorded by CCE.
(8) 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 Remil to Coca-Cola FEMSA.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Financial Measures
(UNAUDITED)
(In millions except per share data)
Three Months Ended July 3, 2009
Items Impacting Comparability
% Change -
After % Change
- After
Reported Asset Considering
Productivity Equity Certain Tax Reported Considering
(GAAP) Impairments/ Items
Initiatives Investees Matters (1) (GAAP) Items
Restructuring (Non-GAAP)
(Non-GAAP)
Net Operating $ 8,267 $ 8,267 (9 ) (2) (9 ) (3)
Revenues
Cost of goods 2,913 2,913 (8 ) (8 )
sold
Gross Profit 5,354 5,354 (9 ) (9 )
Selling,
general and 2,844 2,844 (8 ) (8 )
administrative
expenses
Other
operating 72 ($56 ) ($16 ) - -- --
charges
Operating 2,438 56 16 2,510 (9 ) (10 ) (4)
Income
Interest 57 57 (17 ) (17 )
income
Interest 97 97 9 9
expense
Equity income 310 $ 10 320 -- 11
- net
Other income 20 20 -- --
(loss) - net
Income Before 2,728 56 16 10 2,810 42 (8 )
Income Taxes
Income taxes 679 4 6 2 ($33 ) 658 43 (1 )
Consolidated 2,049 52 10 8 33 2,152 42 (10 )
Net Income
Less: Net
income
attributable 12 12 (43 ) (43 )
to
noncontrolling
interests
Net Income
Attributable
to Shareowners $ 2,037 $ 52 $ 10 $ 8 $ 33 $ 2,140 43 (10 )
of The
Coca-Cola
Company
Diluted Net
Income Per $ 0.88 $ 0.02 $ 0.00 $ 0.00 $ 0.01 $ 0.92 (5) 44 (9 )
Share
Average Shares
Outstanding - 2,323 2,323 2,323 2,323 2,323 2,323
Diluted
Gross Margin 64.8 % 64.8 %
Operating 29.5 % 30.4 %
Margin
Effective Tax 24.9 % 23.4 % (6)
Rate
Three Months Ended June 27, 2008
Items Impacting Comparability
After
Reported Asset Considering
Productivity Equity Transaction Certain Tax Items
(GAAP) Impairments/
Initiatives Investees Gains Matters (1) (Non-GAAP)
Restructuring
Net Operating $ 9,046 $ 9,046
Revenues
Cost of goods 3,162 3,162
sold
Gross Profit 5,884 5,884
Selling,
general and 3,095 3,095
administrative
expenses
Other
operating 110 ($101 ) ($9 ) -
charges
Operating 2,679 101 9 2,789
Income
Interest 69 69
income
Interest 89 89
expense
Equity income (843 ) $ 1,132 289
(loss) - net
Other income 101 ($102 ) (1 )
(loss) - net
Income Before 1,917 101 9 1,132 (102 ) 3,057
Income Taxes
Income taxes 474 22 2 230 (32 ) ($29 ) 667
Consolidated 1,443 79 7 902 (70 ) 29 2,390
Net Income
Less: Net
income
attributable 21 21
to
noncontrolling
interests
Net Income
Attributable
to Shareowners $ 1,422 $ 79 $ 7 $ 902 ($70 ) $ 29 $ 2,369
of The
Coca-Cola
Company
Diluted Net
Income Per $ 0.61 $ 0.03 $ 0.00 $ 0.38 ($0.03 ) $ 0.01 $ 1.01 (5)
Share
Average Shares
Outstanding - 2,343 2,343 2,343 2,343 2,343 2,343 2,343
Diluted
Gross Margin 65.0 % 65.0 %
Operating 29.6 % 30.8 %
Margin
Effective Tax 24.7 % 21.8 %
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:
2009 2008 % Change
Reported net
operating $ 8,267 $ 9,046 (9 )
revenues
Structural - (177 ) --
changes
Net operating
revenues
excluding $ 8,267 $ 8,869 (7 )
structural
changes
(3) Net operating revenues after considering items impacting comparability for the three months ended July 3, 2009 includes a negative currency
impact of approximately 9%. Currency neutral net operating revenue growth after considering items impacting comparability is 0%. Currency neutral
net operating revenue growth includes a negative impact from structural changes of approximately 2%. Currency neutral net operating revenue growth
after considering items impacting comparability and structural changes is 2%.
(4) Operating income after considering items impacting comparability for the three months ended July 3, 2009 includes a negative currency impact
of approximately 14%. Currency neutral operating income growth after considering items impacting comparability is 4%.
(5) Per share amounts do not add due to rounding.
(6) Effective tax rate after considering impact of net income attributable to noncontrolling interests:
2009
Income before income taxes of $2,810 less
net income attributable to noncontrolling $ 2,798
interests of $12
Income taxes $ 658
Effective tax rate after considering
impact of net income attributable to 23.5 %
noncontrolling interests
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes
that certain non-GAAP financial measures used in managing the business may provide users of this financial information additional meaningful
comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide
additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes
certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and
planning decisions and in evaluating the Company's performance. See the tables above for supplemental financial data and corresponding
reconciliations to GAAP financial measures for the three months ended July 3, 2009 and June 27, 2008. 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 July 3, 2009
Items Impacting Comparability
% Change -
After % Change
- After
Reported Asset Considering
Productivity Equity Certain Tax Reported Considering
(GAAP) Impairments/ Items
Initiatives Investees Matters (1) (GAAP) Items
Restructuring (Non-GAAP)
(Non-GAAP)
Net Operating $ 15,436 $ 15,436 (6 ) (2) (6 ) (3)
Revenues
Cost of goods 5,503 5,503 (5 ) (5 )
sold
Gross Profit 9,933 9,933 (7 ) (7 )
Selling,
general and 5,468 5,468 (7 ) (7 )
administrative
expenses
Other
operating 164 ($131 ) ($33 ) - -- --
charges
Operating 4,301 131 33 4,465 (6 ) (6 ) (4)
Income
Interest 117 117 (13 ) (13 )
income
Interest 182 182 (12 ) (12 )
expense
Equity income 327 $ 62 389 -- (8 )
- net
Other income (20 ) 27 7 -- --
(loss) - net
Income Before 4,543 158 33 62 4,796 17 (6 )
Income Taxes
Income taxes 1,135 7 12 15 ($47 ) 1,122 23 1
Consolidated 3,408 151 21 47 47 3,674 15 (8 )
Net Income
Less: Net
income
attributable 23 23 (28 ) (28 )
to
noncontrolling
interests
Net Income
Attributable
to Shareowners $ 3,385 $ 151 $ 21 $ 47 $ 47 $ 3,651 16 (8 )
of The
Coca-Cola
Company
Diluted Net
Income Per $ 1.46 $ 0.07 $ 0.01 $ 0.02 $ 0.02 $ 1.57 (5) 18 (7 )
Share
Average Shares
Outstanding - 2,319 2,319 2,319 2,319 2,319 2,319
Diluted
Gross Margin 64.3 % 64.3 %
Operating 27.9 % 28.9 %
Margin
Effective Tax 25.0 % 23.4 % (6)
Rate
Six Months Ended June 27, 2008
Items Impacting Comparability
After
Reported Asset Considering
Productivity Equity Transaction Certain Tax
(GAAP) Impairments/ Items
Initiatives Investees Gains Matters (1)
Restructuring (Non-GAAP)
Net Operating $ 16,425 $ 16,425
Revenues
Cost of goods 5,786 5,786
sold
Gross Profit 10,639 10,639
Selling,
general and 5,891 5,891
administrative
expenses
Other
operating 195 ($183 ) ($12 ) -
charges
Operating 4,553 183 12 4,748
Income
Interest 134 134
income
Interest 206 206
expense
Equity income (706 ) $ 1,127 421
(loss) - net
Other income 101 ($102 ) (1 )
(loss) - net
Income Before 3,876 183 12 1,127 (102 ) 5,096
Income Taxes
Income taxes 922 36 3 216 (32 ) ($31 ) 1,114
Consolidated 2,954 147 9 911 (70 ) 31 3,982
Net Income
Less: Net
income
attributable 32 32
to
noncontrolling
interests
Net Income
Attributable
to Shareowners $ 2,922 $ 147 $ 9 $ 911 ($70 ) $ 31 $ 3,950
of The
Coca-Cola
Company
Diluted Net
Income Per $ 1.24 $ 0.06 $ 0.00 $ 0.39 ($0.03 ) $ 0.01 $ 1.68 (5)
Share
Average Shares
Outstanding - 2,349 2,349 2,349 2,349 2,349 2,349 2,349
Diluted
Gross Margin 64.8 % 64.8 %
Operating 27.7 % 28.9 %
Margin
Effective Tax 23.8 % 21.9 %
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:
2009 2008 % Change
Reported net
operating $ 15,436 $ 16,425 (6 )
revenues
Structural - (347 ) --
changes
Net operating
revenues
excluding $ 15,436 $ 16,078 (4 )
structural
changes
(3) Net operating revenues after considering items impacting comparability for the six months ended July 3, 2009 includes a negative currency
impact of approximately 9%. Currency neutral net operating revenue growth after considering items impacting comparability is 3%. Currency neutral
net operating revenue growth includes a negative impact from structural changes of approximately 2%. Currency neutral net operating revenue growth
after considering items impacting comparability and structural changes is 6%. Items do not add due to rounding.
(4) Operating income after considering items impacting comparability for the six months ended July 3, 2009 includes a negative currency impact of
approximately 15%. Currency neutral operating income growth after considering items impacting comparability is 9%.
(5) Per share amounts do not add due to rounding.
(6) Effective tax rate after considering impact of net income attributable to noncontrolling interests:
2009
Income before income taxes of $4,796 less
net income attributable to noncontrolling $ 4,773
interests of $23
Income taxes $ 1,122
Effective tax rate after considering impact
of net income attributable to 23.5 %
noncontrolling interests
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes
that certain non-GAAP financial measures used in managing the business may provide users of this financial information additional meaningful
comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide
additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes
certain items that impact the overall comparability. Management also uses these non-GAAP financial measures in making financial, operating and
planning decisions and in evaluating the Company's performance. See the tables above for supplemental financial data and corresponding
reconciliations to GAAP financial measures for the six months ended July 3, 2009 and June 27, 2008. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Financial Measures
Operating Income (Loss) by Segment
(UNAUDITED)
(In millions)
Three Months Ended July 3, 2009 Three Months Ended June 27, 2008
Items Impacting Items Impacting
Comparability Comparability % Favorable
(Unfavorable)
After After % Favorable -
Reported Considering Reported Considering (Unfavorable) After
Asset Asset -
(GAAP) Productivity Items (GAAP) Productivity Items Considering
Impairments/ Impairments/ Reported
Initiatives (Non-GAAP) Initiatives (Non-GAAP) Items
Restructuring Restructuring (GAAP)
(Non-GAAP)
(1)
Eurasia & $ 243 $ 3 $ 246 $ 269 $ 269 (10 ) (9 )
Africa
Europe 861 $ 1 862 1,016 1,016 (15 ) (15 )
Latin 472 472 531 531 (11 ) (11 )
America
North 455 8 463 457 $ 4 461 0 0
America
Pacific 594 594 604 604 (2 ) (2 )
Bottling 122 26 148 156 9 165 (22 ) (10 )
Investments
Corporate (309 ) 19 15 (275 ) (354 ) 88 $ 9 (257 ) 13 (7 )
Consolidated $ 2,438 $ 56 $ 16 $ 2,510 $ 2,679 $ 101 $ 9 $ 2,789 (9 ) (10 )
(1) Currency neutral operating income growth after considering items impacting comparability for each operating segment is calculated as follows:
% Favorable
% Favorable
% Currency (Unfavorable)
(Unfavorable) -
- Impact After
Currency
After Considering
Neutral After
Considering Items
Impacting Considering
Items
Comparability Items
(Non-GAAP)
(Non-GAAP)
Eurasia & (9 ) (18 ) 9
Africa
Europe (15 ) (15 ) 0
Latin (11 ) (23 ) 12
America
North 0 (1 ) 1
America
Pacific (2 ) 0 (2 )
Bottling (10 ) (23 ) 13
Investments
Corporate (7 ) (9 ) 2
Consolidated (10 ) (14 ) 4
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 July 3, 2009 and June 27, 2008. Non-GAAP financial measures
should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Reconciliation of GAAP and Non-GAAP Financial Measures
Operating Income (Loss) by Segment
(UNAUDITED)
(In millions)
Six Months Ended July 3, 2009 Six Months Ended June 27, 2008
Items Impacting Items Impacting
Comparability Comparability % Favorable
(Unfavorable)
After After % Favorable -
Reported Considering Reported Considering (Unfavorable) After
Asset Asset -
(GAAP) Productivity Items (GAAP) Productivity Items Considering
Impairments/ Impairments/ Reported
Initiatives (Non-GAAP) Initiatives (Non-GAAP) Items
Restructuring Restructuring (GAAP)
(Non-GAAP)
(1)
Eurasia & $ 450 $ 3 $ 453 $ 496 $ 496 (9 ) (9 )
Africa
Europe 1,553 $ 1 1,554 1,751 1,751 (11 ) (11 )
Latin 926 926 1,037 1,037 (11 ) (11 )
America
North 883 13 896 781 $ 6 787 13 14
America
Pacific 1,050 1,050 992 992 6 6
Bottling 53 91 144 173 13 186 (69 ) (23 )
Investments
Corporate (614 ) 24 32 (558 ) (677 ) 164 $ 12 (501 ) 9 (11 )
Consolidated $ 4,301 $ 131 $ 33 $ 4,465 $ 4,553 $ 183 $ 12 $ 4,748 (6 ) (6 )
(1) Currency neutral operating income growth after considering items impacting comparability for each operating segment is calculated as follows:
% Favorable
% Favorable
% Currency (Unfavorable)
(Unfavorable) -
- Impact After
Currency
After Considering
Neutral After
Considering Items
Impacting Considering
Items
Comparability Items
(Non-GAAP)
(Non-GAAP)
Eurasia & (9 ) (22 ) 13
Africa
Europe (11 ) (14 ) 3
Latin (11 ) (24 ) 13
America
North 14 (1 ) 15
America
Pacific 6 2 4
Bottling (23 ) (33 ) 10
Investments
Corporate (11 ) (11 ) 0
Consolidated (6 ) (15 ) 9
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP
financial measures used in managing the business may provide users of this financial information additional meaningful comparisons between current results and results
in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the
business because they provide a comparison of historical information that excludes certain items that impact the overall comparability. Management also uses these
non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company's performance. See the tables above for supplemental
financial data and corresponding reconciliations to GAAP financial measures for the six months ended July 3, 2009 and June 27, 2008. Non-GAAP financial measures
should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
The Coca-Cola Company
The Coca-Cola Company (NYSE: KO) is the world's largest beverage company, refreshing consumers with 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 competitive product and pricing pressures; impact of the global credit crisis on our liquidity and financial performance; our ability to expand our operations in developing and emerging markets; foreign currency exchange rate fluctuations; increases in interest rates; our ability to maintain good relationships with our bottling partners; the financial condition of our bottling partners; our ability and the ability of our bottling partners to maintain good labor relations, including the ability to renew collective bargaining agreements on satisfactory terms and avoid strikes, work stoppages or labor unrest; increase in the cost, disruption of supply or shortage of energy; increase in cost, disruption of supply or shortage of ingredients or packaging materials; changes in laws and regulations relating to beverage containers and packaging, including container deposit, recycling, eco-tax and/or product stewardship laws or regulations; adoption of significant additional labeling or warning requirements; unfavorable general economic conditions in the United States or other major markets; unfavorable economic and political conditions in international markets, including civil unrest and product boycotts; changes in commercial or market practices and business model within the European Union; litigation uncertainties; adverse weather conditions; our ability to maintain brand image and corporate reputation as well as other product issues such as product recalls; changes in legal and regulatory environments; changes in accounting standards and taxation requirements; our ability to achieve overall long-term goals; our ability to protect our information systems; additional impairment charges; our ability to successfully manage Company-owned bottling operations; the impact of climate change on our business; global or regional catastrophic events; and other risks discussed in our Company's filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.
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Source: The Coca-Cola Company
Released July 21, 2009