The Coca-Cola Company Reports Third Quarter and Year-to-Date 2007 Results
-- Third quarter EPS increased 15 percent to $0.71.
-- Third quarter net revenue growth of 19 percent on worldwide unit case volume growth of 6 percent.
-- International unit case volume up 8 percent, led by 6 percent growth in Trademark Coca-Cola.
-- Balanced growth with sparkling beverage unit case volume up 4 percent and still beverage unit case volume up 14 percent.
-- Strong cash generation continued, with year-to-date cash from operations increasing 18 percent.
ATLANTA--(BUSINESS WIRE)--
The Coca-Cola Company today reported third quarter earnings per share of $0.71, an increase of 15 percent versus the prior year quarter. Earnings per share for the quarter 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. Earnings per share for the third quarter of 2006 were $0.62 and included a charge primarily related to asset impairment and restructuring charges, offset by a benefit primarily related to the reversal of a tax valuation allowance.
"With another strong quarter of double-digit earnings growth, we are demonstrating our ability to create shareowner value from the combined strengths of our brands and our global reach," said Neville Isdell, chairman and chief executive officer, The Coca-Cola Company. "By continuing to execute -- together with our bottling partners -- our clearly defined strategies, we see further attractive opportunities ahead for the long-term sustainable growth of our system.
"Once again, this strong performance was led by our international business. Emerging market growth, combined with sequential improvement in North America, resulted in our third consecutive quarter of 6 percent unit case volume growth. Global sparkling beverage volume growth remained robust at 4 percent, and still beverages increased 14 percent as we focused on the highest value opportunities around the world. As we enter the final quarter of the year, we will continue to leverage our leading brands and strategic acquisitions and build our innovation pipeline while driving productivity."
President and chief operating officer Muhtar Kent said, "World-class system execution continues to drive balanced growth across our global markets and portfolio of products, while providing consistency and sustainability in our business. In the quarter, performance in our Latin America, Africa, Eurasia and Pacific operating groups remained robust and solid results in Japan, India and the Philippines reflected our ability to restore sustainable growth to key markets.
"As expected, our European Union Group faced difficult comparables from a strong set of results in 2006. However, I am pleased with our ability to drive results across our portfolio of brands by utilizing innovations such as Coca-Cola Zero and trademark brands such as Minute Maid. I am also encouraged by the early signs of progress in North America. Importantly, these results reflect the mindset and actions of our people who share a relentless commitment to winning around the globe."
(All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.)
Financial Highlights
-- Third quarter net operating revenues increased 19 percent.
Revenue growth reflected a 6 percent increase in concentrate
sales, an 8 percent increase from structural changes resulting
from acquisitions of certain bottlers, a 4 percent positive
currency impact and a 1 percent favorable impact from pricing
and mix.
-- Operating income in the quarter increased 10 percent on a
reported basis and 12 percent after considering items
impacting comparability. Items impacting comparability
negatively affected third quarter pre-tax operating income by
$84 million in 2007 and by $39 million in 2006. Currency
benefited operating income in the quarter by 3 percent.
-- The Company has lowered its expected underlying effective tax
rate on operations for 2007 to 22.0 percent from 22.5 percent,
providing a $0.01 per share benefit in the quarter.
-- Year-to-date, the Company repurchased $1.6 billion of its
stock and intends to repurchase a total of $1.75 to $2.0
billion of its stock for the full year.
-- Cash from operations was $5.5 billion year-to-date, compared
with $4.6 billion in the prior year period, an increase of 18
percent.
Operational Highlights
(All references to unit case volume percentage changes in this section are computed based on average daily sales. Group operational highlights are reported in line with the Company's operating structure as described in the Company's Form 8-K filing dated April 2, 2007.)
Total Company
-- Unit case volume increased 6 percent in the third quarter,
cycling 5 percent growth in the prior year quarter, and
increased 6 percent year-to-date. Acquisitions contributed 1
point of unit case volume growth in the quarter.
-- International operations delivered 8 percent unit case volume
growth in the quarter, reflecting double-digit growth in key
emerging markets, including China, Turkey, Russia, India,
Pakistan, Brazil, the Philippines, Eastern Europe and Southern
Eurasia. Unit case volume growth of more than 4 percent in
Japan reflected improved consistency in performance. The Latin
America and Africa Groups continued to achieve strong
broad-based unit case volume growth across all business units.
Unit case volume declined 2 percent in the European Union as
solid growth in Central and Southern Europe was offset by
declines in Western Europe as a result of unfavorable weather
in the quarter and the cycling of acquisitions, World Cup
activation and favorable weather in the prior year quarter.
North America achieved 1 percent unit case volume growth,
reflecting improved performance and the benefit of
acquisitions.
-- The Company continued to achieve strong growth in sparkling
beverages, which increased unit case volume 4 percent in the
quarter. Key brands led the way with Trademarks Coca-Cola,
Fanta and Sprite growing unit case volume 4, 4 and 9 percent,
respectively, in the quarter.
-- Still beverage unit case volume increased 14 percent in the
quarter, continuing its strong performance. Unit case volume
in the quarter for Trademark Dasani increased high single
digits, cycling double-digit growth in the prior year quarter.
Additionally, unit case volume of Trademark Powerade and
Trademark Minute Maid increased double digits and low single
digits, respectively, in the quarter.
-- Globally, the Company gained volume and value share in
nonalcoholic ready-to-drink beverages, as well as in key
beverage categories, including sparkling beverages,
juice/juice drinks, sports drinks, water and energy drinks.
Africa
-------
Percent Change
From Prior Year
-------------------------------------
Third Year-
Quarter To-Date
------------------- -----------------
Unit Case Volume 8% 11%
Net Revenues 8% 13%
Operating Income 2% 1%
-- The Africa Group unit case volume increased 8 percent in the
quarter, reflecting 9 percent growth in South Africa and solid
growth in Nigeria, East and Central Africa and North and West
Africa. Net revenues for the quarter increased 8 percent,
reflecting a 1 percent increase in concentrate sales and
positive pricing and mix. Operating income increased 2 percent
for the quarter reflecting the increase in net revenues,
partially offset by restructuring charges, a slight negative
currency impact and the continued investment in key marketing
initiatives including the launch of Coca-Cola Zero in Egypt.
Eurasia
-------
Percent Change
From Prior Year
------------------------------------------
Third Year-
Quarter To-Date
-------------------- ---------------------
Unit Case Volume 17% 17%
Net Revenues 24% 21%
Operating Income 65% 38%
-- The Eurasia Group's unit case volume increased 17 percent in
the quarter, cycling 16 percent growth in the prior year
quarter. Double-digit unit case volume growth across most of
the Group, including Russia, India, Pakistan, Turkey, Eastern
Europe and Southern Eurasia, drove the results. Net revenues
for the quarter increased 24 percent, benefiting from a 20
percent increase in concentrate sales with positive pricing
and currency benefits. Operating income growth in the quarter
of 65 percent reflected the benefit of the net revenue
increase and efficiency of investment in key business
initiatives.
-- In India, unit case volume increased 21 percent in the
quarter, driven by strong double-digit growth in Trademark
Coca-Cola. Continued investment in building organizational
capabilities and marketing communications, and focus on
improved execution by the consolidated bottling operations
resulted in solid growth and share gains in sparkling and
still beverages.
European Union
--------------
Percent Change
From Prior Year
------------------------------------
Third Year-
Quarter To-Date
----------------- ------------------
Unit Case Volume (2%) 4%
Net Revenues 6% 14%
Operating Income 3% 18%
-- Unit case volume in the European Union Group decreased 2
percent in the quarter, cycling 10 percent growth in the prior
year quarter. Solid unit case volume growth in Central and
Southern Europe was offset by a mid single-digit volume
decline in Western Europe, resulting from unfavorable summer
weather across Western Europe and the cycling of World Cup
activation, acquisitions and favorable weather in the prior
year quarter. Continued execution of core strategies led to
stabilization or share gains in key categories across the
Group, while the industry was impacted by the unfavorable
summer weather. In the quarter, net revenues increased 6
percent, reflecting a 2 percent decrease in concentrate sales,
positive pricing and mix, and a mid single-digit benefit from
currency. Operating income in the quarter increased 3 percent,
primarily reflecting the net revenue increase, the focus on
operating expense management, and the continued investment in
key marketing initiatives, including leveraging the Coke Side
of Life, Music and iTunes marketing campaigns, as well as the
continued success of Coca-Cola Zero.
-- Unit case volume in Germany decreased 9 percent, cycling 15
percent growth in the prior year quarter. The results
reflected overall industry softness and were driven by
unfavorable summer weather and the cycling of World Cup
activities and favorable weather in the prior year quarter.
Coca-Cola Zero continued its success with volume growth in the
quarter. Additionally, increased availability in the
discounter channel supported the results. Effective September
1, 2007, the Company successfully completed the consolidation
of the German bottling system. The single bottler will over
time improve the Company's speed and flexibility in the market
and with customers to drive top-line performance and supply
chain efficiencies.
Latin America
--------------
Percent Change
From Prior Year
---------------------------------------
Third Year-
Quarter To-Date
------------------- -------------------
Unit Case Volume 9% 9%
Net Revenues 28% 24%
Operating Income 22% 20%
-- The Latin America Group delivered strong unit case volume
growth of 9 percent in the quarter, cycling 7 percent growth
in the prior year quarter. Strong growth across all key
markets and 7 percent growth in Trademark Coca-Cola drove the
results. In the quarter, net revenues increased 28 percent,
reflecting a 12 percent increase in concentrate sales,
positive pricing and mix benefits, and a mid-single digit
currency benefit. Operating income in the quarter increased 22
percent, reflecting the net revenue increase and the continued
investment in key marketing initiatives, including continued
support behind Coca-Cola Zero and the new on-the-go 'Contour
Grip' bottle to drive profitable single-serve growth.
-- In Mexico, unit case volume increased 7 percent in the
quarter, cycling 4 percent growth in the prior year quarter
and delivering share gains. The growth was led by Trademark
Coca-Cola, which increased 5 percent for the quarter including
the continued success of Coca-Cola Zero which led to volume
and value share gains in sparkling beverages.
-- In Brazil, unit case volume growth for the quarter was 16
percent, cycling 11 percent growth in the prior year. Solid
growth in Trademark Coca-Cola led to sparkling beverage share
gains. Continued unit case volume growth in still beverages
also drove the results and led to continued share gains.
-- In Argentina, solid growth in Trademark Coca-Cola, including
the continued success of Coca-Cola Zero, and Trademark Fanta,
which leveraged the global Fanta 'Play' campaign, contributed
to unit case volume growth of 5 percent in the quarter,
cycling 14 percent growth in the prior year quarter, and led
to share gains.
North America
-------------
Percent Change
From Prior Year
-----------------------------------
Third Year-
Quarter To-Date
------------------ ----------------
Unit Case Volume 1% (1%)
Net Revenues 21% 11%
Operating Income 17% 2%
-- Unit case volume in the North America Group increased 1
percent in the quarter, reflecting a 2 percent increase in
Retail, including a benefit from acquisitions, and even volume
in Foodservice and Hospitality. Net revenues for the quarter
increased 21 percent, reflecting a 2 percent increase in
concentrate sales, positive pricing, a mix benefit from strong
sales of energy drinks and Powerade and an increase due to
acquisitions. Operating income in the quarter increased 17
percent, reflecting the net revenue increase, including the
benefit from acquisitions, partially offset by the impact of
higher input costs on the finished goods businesses and
restructuring costs.
-- Sparkling beverage unit case volume declined 2 percent in the
quarter, reflecting the expected difficult category
environment resulting from increased retail pricing. Category
share gains in sparkling beverages were led by the performance
of diet sparkling beverages, which delivered even unit case
volume growth in the quarter. Coca-Cola Zero continued to
deliver strong performance in the quarter increasing unit case
volume double digits leading to category share gains. Energy
drinks continued to deliver strong double-digit growth in the
quarter.
-- Still beverage unit case volume increased 10 percent in the
quarter, reflecting solid growth in Powerade and Dasani, and
the benefit from acquisitions. Powerade delivered double-digit
unit case volume growth and gained share in the quarter.
Dasani unit case volume increased mid single digits in the
quarter, cycling double-digit growth in the prior year
quarter. Warehouse-delivered chilled juices continued to gain
category value share in the quarter, even though volume was
negatively impacted by price increases to cover higher raw
material costs. This decline was partially offset by continued
unit case volume growth in Trademark Simply and Odwalla
juices. Fuze and glaceau unit case volume increased ahead of
our expectations and reflected increased availability and
velocity.
-- On August 30, 2007, the Company announced the completion of
the distribution agreement for the glaceau brands. The
operating model is flexible, takes advantage of the strengths
of the Coca-Cola system and leverages existing
routes-to-market. The final distribution model is a hybrid
which includes a mix of current distributors and bottlers with
certain channels handled directly by the Company.
Pacific
-------
Percent Change
From Prior Year
--------------------------------------------
Third Year-
Quarter To-Date
---------------------- ---------------------
Unit Case Volume 11% 9%
Net Revenues 6% 7%
Operating Income 2% 2%
-- The Pacific Group increased unit case volume by 11 percent for
the quarter, driven by double-digit growth in Trademark
Coca-Cola. Net revenues for the quarter increased 6 percent,
reflecting a 13 percent increase in concentrate sales,
partially offset by unfavorable country mix. Operating income
increased 2 percent for the quarter, driven by the increase in
net revenues and a benefit from the cycling of restructuring
charges in the prior year quarter, partially offset by the
continued investment in key marketing initiatives and a
negative low single digit currency impact.
-- In Japan, unit case volume increased more than 4 percent in
the quarter, the fourth consecutive quarter of positive
growth, leading to a share gain in the total nonalcoholic
ready-to-drink category. Growth was led by a double-digit
increase in Trademark Coca-Cola, as the three cola strategy
delivered growth for all three brands, and continued growth in
Trademark Sprite. In still beverages, the solid unit case
volume growth of Sokenbicha, Aquarius, Qoo and the water
portfolio led to category share gains. Georgia Coffee unit
case volume declined mid single digits in the quarter,
reflecting softness in the category due to prolonged warm
weather.
-- In China, unit case volume increased 20 percent led by
double-digit growth in Trademark Coca-Cola, supported by the
activation of the 2008 Summer Olympics campaign and continued
success of the 'Contour Grip' single serve package, and
double-digit growth in Trademark Sprite. Still beverage unit
case volume increased double digits in the quarter reflecting
strong growth in Minute Maid. The strong performance across
the portfolio resulted in share gains in both sparkling and
still beverages.
-- In the Philippines, unit case volume increased by 13 percent
in the quarter, cycling an 11 percent decline in the prior
year quarter. The performance reflects the investment in key
marketing initiatives and the focus on improving the
route-to-market, reshaping and streamlining the supply chain
and building sales capabilities.
Bottling Investments
--------------------
Percent Change
From Prior Year
---------------------------------
Third Year-
Quarter To-Date
---------------------------------
Unit Case Volume 63% 64%
Net Revenues 44% 49%
Operating Income 23% 70%
-- The Bottling Investments Group's unit case volume increased 63
percent in the quarter, including a benefit from acquisitions
of certain bottlers. Net revenues increased 44 percent for the
quarter due to the unit case volume increase, the acquisition
of certain bottlers, favorable pricing and positive currency
benefits, partially offset by negative mix due to unit case
volume decline in Germany. The operating income increase in
the quarter reflects the focus on driving improved financial
performance through revenue increases, partially offset by the
impact of restructuring charges in the current and prior year
quarters.
Financial Review
Operating Results
Net operating revenues for the quarter increased 19 percent, reflecting a 6 percent increase in concentrate sales, an 8 percent increase from structural changes resulting from acquisitions of certain bottlers, a 4 percent positive currency impact and a 1 percent favorable impact from pricing and mix.
Cost of goods sold increased 27 percent for the quarter, reflecting a 6 percent increase in concentrate sales, a 16 percent increase from structural changes resulting from acquisitions of certain bottlers and items impacting comparability, a 4 percent increase from currency and increases in commodity-based input and freight costs.
Selling, general and administrative expenses for the quarter increased 16 percent, reflecting a 6 percent increase from structural changes resulting from acquisitions of certain bottlers, a 4 percent increase from currency, increased costs in the consolidated bottling operations to drive growth and continued investments in marketing, while effectively managing overall costs through productivity initiatives.
The Company had other operating charges in the quarter of $81 million pre-tax primarily related to restructuring charges.
Operating income for the quarter increased 10 percent. After considering items impacting comparability, operating income increased 12 percent, reflecting the growth in gross profit, including the benefit of brand acquisitions, the investments in marketing and increased sales and service expenses in the bottling operations, while effectively managing general and administrative expenses through productivity initiatives. Currency increased operating income in the quarter by 3 percent. Based on current spot rates and the anticipated benefits of hedging coverage in place, the Company currently expects currency to have a mid single-digit favorable impact on operating income for the fourth quarter.
Equity income increased 24 percent in the quarter, reflecting solid performance from the bottling system throughout the world and tax benefits recorded at an equity investee, partially offset by asset write-downs and restructuring costs recorded by equity investees.
In the third quarter, the Company sold a portion of its ownership interest in Coca-Cola Amatil Limited, reducing its interest from 32 percent to 30 percent, and recorded a gain of $73 million pre-tax in Other Income.
Effective Tax Rate
The reported effective tax rate for the quarter was 21.7 percent. The rate was reduced primarily due to lowering the estimated full year underlying effective tax rate. The Company is required to record income tax expense for the first nine months of the year based on the estimated effective tax rate for the year. As discussed in the second quarter earnings release, the Company had previously estimated that its underlying effective tax rate on operations would be approximately 22.5 percent for the full year. The Company now anticipates that its underlying effective tax rate on operations for the full year 2007 will be approximately 22.0 percent. To bring the effective tax rate for the first nine months of 2007 in line with the Company's currently estimated full year underlying effective tax rate, the Company recorded income tax expense at an underlying effective tax rate of approximately 21.0 percent in the third quarter. For 2008, the Company anticipates that its underlying effective tax rate on operations will be 22.0 to 22.5 percent. The Company's estimated underlying effective tax rate does not reflect the impact of significant or unusual items and discrete events, which, if and when they occur, are separately recognized in the appropriate period.
New Operating Structure
As previously announced, effective January 1, 2007, the Company made certain changes to its operating structure to align geographic responsibility. This new structure resulted in the reconfiguration of two operating segments which were renamed Eurasia Group and Pacific Group. The reconfiguration did not impact the other existing geographic operating segments, Bottling Investments or Corporate. Reclassified operating segment information can be found in the Company's Form 8-K filing dated April 2, 2007.
Items Impacting Prior Year Results
In 2006, the third quarter results included a charge primarily related to asset impairment and restructuring charges, offset by a benefit primarily related to the reversal of a tax valuation allowance. In 2006, the second quarter results included a net benefit of $0.04 per share primarily due to a gain from the sale of shares in the initial public offering of the Turkish bottler, Coca-Cola Icecek A.S. In 2006, the first quarter results included a net reduction of $0.02 per share primarily related to non-cash impairment charges of certain assets and investments in the bottling operations in Asia.
Conference Call
The Company will host a conference call with investors and analysts to discuss the third quarter 2007 results today at 8:30 a.m. (EDT). The Company invites investors to listen to the live audiocast of the conference call at the Company's 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 disclosure and reconciliation of non-GAAP financial measures that may be used periodically by management when discussing the Company's financial results with investors and analysts.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
----------------------------------------------------------------------
Three Months Ended
---------------------------------------
September 28, September 29,
2007 2006 % Change
-------------- -------------- --------
Net Operating Revenues $ 7,690 $ 6,454 19
Cost of goods sold 2,884 2,265 27
-------------- --------------
Gross Profit 4,806 4,189 15
Selling, general and
administrative expenses 2,896 2,488 16
Other operating charges 81 39 --
-------------- --------------
Operating Income 1,829 1,662 10
Interest income 59 35 69
Interest expense 127 47 170
Equity income - net 287 231 24
Other income (loss) - net 65 (55) --
-------------- --------------
Income Before Income Taxes 2,113 1,826 16
Income taxes 459 366 25
-------------- --------------
Net Income $ 1,654 $ 1,460 13
============== ==============
Diluted Net Income Per Share(a) $ 0.71 $ 0.62 15
============== ==============
Average Shares Outstanding -
Diluted(a) 2,331 2,343
============== ==============
(a) For the three months ended September 28 and September 29, "Basic
Net Income Per Share" was $0.72 for 2007 and $0.62 for 2006 based on
"Average Shares Outstanding - Basic" of 2,311 and 2,342 for 2007 and
2006, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
----------------------------------------------------------------------
Nine Months Ended
----------------------------------------
September 28, September 29,
2007 2006 % Change
-------------- -------------- ---------
Net Operating Revenues $ 21,526 $ 18,156 19
Cost of goods sold 7,765 6,101 27
-------------- --------------
Gross Profit 13,761 12,055 14
Selling, general and
administrative expenses 7,906 6,844 16
Other operating charges 129 115 --
-------------- --------------
Operating Income 5,726 5,096 12
Interest income 150 152 (1)
Interest expense 300 173 73
Equity income - net 497 569 (13)
Other income (loss) - net 177 48 --
-------------- --------------
Income Before Income Taxes 6,250 5,692 10
Income taxes 1,483 1,290 15
-------------- --------------
Net Income $ 4,767 $ 4,402 8
============== ==============
Diluted Net Income Per
Share(a) $ 2.05 $ 1.87 10
============== ==============
Average Shares Outstanding -
Diluted(a) 2,326 2,354
============== ==============
(a) For the nine months ended September 28 and September 29, "Basic
Net Income Per Share" was $2.06 for 2007 and $1.87 for 2006 based on
"Average Shares Outstanding - Basic" of 2,312 and 2,353 for 2007 and
2006, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(UNAUDITED)
(In millions except par value)
----------------------------------------------------------------------
September 28, 2007 December 31, 2006
------------------ -----------------
Assets
----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 4,616 $ 2,440
Marketable securities 195 150
Trade accounts receivable, less
allowances of $111 and $63,
respectively 3,116 2,587
Inventories 2,048 1,641
Prepaid expenses and other assets 2,120 1,623
-------------- -------------
Total Current Assets 12,095 8,441
-------------- -------------
Investments
Equity method investments 6,602 6,310
Cost method investments,
principally bottling companies 504 473
-------------- -------------
Total Investments 7,106 6,783
-------------- -------------
Other Assets 2,634 2,701
Property, Plant and Equipment -
net 8,003 6,903
Trademarks With Indefinite Lives 5,218 2,045
Goodwill 4,170 1,403
Other Intangible Assets 2,444 1,687
-------------- -------------
Total Assets $ 41,670 $ 29,963
============== =============
Liabilities and Shareowners' Equity
----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued
expenses $ 7,130 $ 5,055
Loans and notes payable 7,992 3,235
Current maturities of long-term
debt 60 33
Accrued income taxes 384 567
-------------- -------------
Total Current Liabilities 15,566 8,890
-------------- -------------
Long-Term Debt 1,594 1,314
Other Liabilities 3,438 2,231
Deferred Income Taxes 1,403 608
Shareowners' Equity
Common stock, $0.25 par value;
Authorized - 5,600 shares;
Issued - 3,519 shares and 3,511
shares, respectively 880 878
Capital surplus 6,947 5,983
Reinvested earnings 35,809 33,468
Accumulated other comprehensive
income (loss) (470) (1,291)
Treasury stock, at cost - 1,211
shares and 1,193 shares,
respectively (23,497) (22,118)
-------------- -------------
Total Shareowners' Equity 19,669 16,920
-------------- -------------
Total Liabilities and Shareowners'
Equity $ 41,670 $ 29,963
============== =============
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
(In millions)
----------------------------------------------------------------------
Nine Months Ended
-------------------------------------
September 28, 2007September 29, 2006
------------------------------------
Operating Activities
Net income $ 4,767 $ 4,402
Depreciation and amortization 794 666
Stock-based compensation expense 241 237
Deferred income taxes (67) (32)
Equity income or loss, net of
dividends (331) (420)
Foreign currency adjustments 6 47
Gains on sales of assets,
including bottling interests (213) (127)
Other operating charges 129 115
Other items 59 127
Net change in operating assets
and liabilities 72 (381)
----------------- ------------------
Net cash provided by
operating activities 5,457 4,634
----------------- ------------------
Investing Activities
Acquisitions and investments,
principally trademarks and
bottling companies (3,935) (784)
Purchases of other investments (29) (75)
Proceeds from disposals of other
investments 266 210
Purchases of property, plant and
equipment (1,091) (960)
Proceeds from disposals of
property, plant and
equipment 179 72
Other investing activities (2) (5)
----------------- ------------------
Net cash used in investing
activities (4,612) (1,542)
----------------- ------------------
Financing Activities
Issuances of debt 7,094 298
Payments of debt (3,599) (2,075)
Issuances of stock 1,013 8
Purchases of stock for treasury (1,699) (1,212)
Dividends (1,575) (1,460)
----------------- ------------------
Net cash provided by (used
in) financing activities 1,234 (4,441)
----------------- ------------------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents 97 36
----------------- ------------------
Cash and Cash Equivalents
Net increase (decrease) during
the period 2,176 (1,313)
Balance at beginning of period 2,440 4,701
----------------- ------------------
Balance at end of period $ 4,616 $ 3,388
================= ==================
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Three Months Ended
Operating
Income
Net Operating Revenues (Loss)
----------------------------------------------------------------------
September September September
28, 2007 29, 2006 % Fav. / 28, 2007
(1) (4) (Unfav.) (2)
----------------------------------------------------------------------
Africa $ 312 $ 288 8 $ 99
Eurasia 278 224 24 81
European Union 1,298 1,228 6 652
Latin America 835 654 28 430
North America 2,186 1,809 21 447
Pacific 1,206 1,134 6 428
Bottling Investments 2,107 1,464 44 58
Corporate 17 24 (29) (366)
Eliminations (549) (371) - -
----------------------------------------------
Consolidated $ 7,690 $6,454 19 $ 1,829
----------------------------------------------------------------------
Operating Income Income (Loss) Before Income
(Loss) Taxes
----------------------------------------------------------------------
September September September
29, 2006 % Fav. / 28, 2007 29, 2006% Fav. /
(5) (Unfav.) (2), (3) (5), (6) (Unfav.)
----------------------------------------------------------------------
Africa $ 97 2 $ 97 $ 94 3
Eurasia 49 65 90 52 73
European Union 632 3 651 632 3
Latin America 353 22 431 350 23
North America 383 17 452 383 18
Pacific 421 2 427 419 2
Bottling
Investments 47 23 308 253 22
Corporate (320) (14) (343) (357) 4
Eliminations - - - - -
---------------------------------------------------
Consolidated $ 1,662 10 $2,113 $1,826 16
----------------------------------------------------------------------
Note: Refer to the Company's Form 8-K filing dated April 2, 2007 for more information on the changes to the Company's operating structure.
(1) Intersegment revenues for the three months ended September 28, 2007 were $19 million for Africa, $26 million for Eurasia, $280 million for European Union, $44 million for Latin America, $26 million for North America, $112 million for Pacific and $42 million for Bottling Investments.
(2) Operating income (loss) and income (loss) before income taxes for the three months ended September 28, 2007 were reduced by $13 million for Africa, $2 million for Eurasia, $7 million for European Union, $1 million for Latin America, $13 million for North America, $14 million for Bottling Investments and $34 million for Corporate primarily due to restructuring costs.
(3) Income (loss) before income taxes for the three months ended September 28, 2007 was increased by $21 million for Bottling Investments primarily due to our proportionate share of tax benefits recorded at an equity investee, offset by asset write-downs and restructuring costs recorded by equity investees, and was increased by $73 million for Corporate due to a gain on the sale of Coca-Cola Amatil shares.
(4) Intersegment revenues for the three months ended September 29, 2006 were $14 million for Africa, $21 million for Eurasia, $245 million for European Union, $30 million for Latin America, $26 million for Pacific and $35 million for Bottling Investments.
(5) Operating income (loss) and income (loss) before income taxes for the three months ended September 29, 2006 were reduced by $1 million for Africa, $7 million for European Union, $15 million for Pacific and $16 million for Bottling Investments primarily due to contract termination costs related to production capacity efficiencies, asset impairments and other restructuring costs.
(6) Income (loss) before income taxes for the three months ended September 29, 2006 was reduced by $3 million for Bottling Investments due to certain items impacting equity investees.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Nine Months Ended
----------------------------------------------------------------------
Operating
Income
Net Operating Revenues (Loss)
----------------------------------------------------------------------
September 28, September September
2007 29, 2006 % Fav. / 28, 2007
(1) (4) (Unfav.) (2)
----------------------------------------------------------------------
Africa $ 922 $ 815 13 $ 290
Eurasia 849 701 21 330
European Union 3,837 3,362 14 2,085
Latin America 2,333 1,879 24 1,258
North America 5,950 5,363 11 1,294
Pacific 3,315 3,099 7 1,306
Bottling Investments 5,719 3,847 49 131
Corporate 49 66 (26) (968)
Eliminations (1,448) (976) - -
-------------------------------------------------
Consolidated $21,526 $ 18,156 19 $ 5,726
----------------------------------------------------------------------
Operating Income Income (Loss) Before Income
(Loss) Taxes
----------------------------------------------------------------------
September September September
29, 2006 % Fav. / 28, 2007 29, 2006% Fav. /
(5) (Unfav.) (2), (3) (5), (6) (Unfav.)
----------------------------------------------------------------------
Africa $ 287 1 $ 283 $ 279 1
Eurasia 239 38 347 257 35
European Union 1,774 18 2,086 1,778 17
Latin America 1,048 20 1,259 1,045 20
North America 1,264 2 1,294 1,263 2
Pacific 1,276 2 1,295 1,274 2
Bottling Investments 77 70 562 601 (6)
Corporate (869) (11) (876) (805) (9)
Eliminations - - - - -
-------------------------------------------------
Consolidated $ 5,096 12 $6,250 $5,692 10
----------------------------------------------------------------------
Note: Refer to the Company's Form 8-K filing dated April 2, 2007 for more information on the changes to the Company's operating structure.
(1) Intersegment revenues for the nine months ended September 28, 2007 were $41 million for Africa, $93 million for Eurasia, $743 million for European Union, $104 million for Latin America, $63 million for North America, $297 million for Pacific and $107 million for Bottling Investments.
(2) Operating income (loss) and income (loss) before income taxes for the nine months ended September 28, 2007 were reduced by $33 million for Africa, $2 million for Eurasia, $12 million for European Union, $3 million for Latin America, $13 million for North America, $1 million for Pacific, $43 million for Bottling Investments and $35 million for Corporate primarily due to restructuring costs and asset write-downs.
(3) Income (loss) before income taxes for the nine months ended September 28, 2007 was decreased by $141 million for Bottling Investments primarily due to our proportionate share of asset write-downs and restructuring costs recorded by equity investees and was increased by $209 million for Corporate primarily due to gains on the sale of real estate in Spain, the sale of our ownership in Vonpar, a bottler in Brazil, and the sale of Coca-Cola Amatil shares.
(4) Intersegment revenues for the nine months ended September 29, 2006 were $29 million for Africa, $70 million for Eurasia, $656 million for European Union, $90 million for Latin America, $57 million for Pacific and $74 million for Bottling Investments.
(5) Operating income (loss) and income (loss) before income taxes for the nine months ended September 29, 2006 were reduced by $1 million for Africa, $34 million for European Union, $20 million for Pacific and $60 million for Bottling Investments primarily due to contract termination costs related to production capacity efficiencies, asset impairments and other restructuring costs.
(6) Income (loss) before income taxes for the nine months ended September 29, 2006 was increased by $9 million for Bottling Investments due to certain items impacting equity investees and was increased by $123 million for Corporate due to the gain on the sale of shares in the initial public offering of the Turkish bottler.
THE COCA-COLA COMPANY AND SUBSIDIARIES
----------------------------------------------------------------------
Reconciliation of GAAP to Non-GAAP Financial Measures
----------------------------------------------------------------------
(UNAUDITED)
(In millions except per share data)
---------------------------------
Three Months Ended September 28,
2007
-------------------------------------
Items Impacting
Comparability
---------------------------
Asset
Reported Impairments/ Equity
(GAAP) Restructuring Investees
---------------------------------
Net Operating Revenues $7,690
Cost of goods sold 2,884 ($3)
---------------------------------
Gross Profit 4,806 3
Selling, general and
administrative expenses 2,896
Other operating charges 81 (81)
---------------------------------
Operating Income (2) 1,829 84
Interest income 59
Interest expense 127
Equity income - net 287 ($21)
Other income (loss) - net 65
---------------------------------
Income Before Income Taxes 2,113 84 (21)
Income taxes 459 16 (7)
---------------------------------
Net Income $1,654 $ 68 ($14)
=================================
Diluted Net Income Per Share $ 0.71 $ 0.03 ($0.01)
=================================
Average Shares Outstanding -
Diluted 2,331 2,331 2,331
=================================
Gross Margin 62.5%
Operating Margin 23.8%
Effective Tax Rate 21.7%
---------------------------------
-------------------------------
Three Months Ended September
28, 2007
-------------------------------
Items Impacting
Comparability
------------------
Gains on After
Sales Certain Considering
of Tax Items
Assets Matters (Non-GAAP)
-------------------------------
Net Operating Revenues $7,690 (1)
Cost of goods sold 2,881
-------------------------------
Gross Profit 4,809
Selling, general and administrative
expenses 2,896
Other operating charges -
-------------------------------
Operating Income (2) 1,913
Interest income 59
Interest expense 127
Equity income - net 266
Other income (loss) - net ($73) (8)
-------------------------------
Income Before Income Taxes (73) 2,103
Income taxes (31) $ 4 441
-------------------------------
Net Income ($42) ($4) $1,662
===============================
Diluted Net Income Per Share ($0.02) $ 0.00 $ 0.71
===============================
Average Shares Outstanding - Diluted 2,331 2,331 2,331
===============================
Gross Margin 62.5%
Operating Margin 24.9%
Effective Tax Rate 21.0%
-------------------------------
-----------------------------
% Change -
After
% Change - Considering
Reported Items
(GAAP) (Non-GAAP)
-----------------------------
Net Operating Revenues 19 19
Cost of goods sold 27 27
Gross Profit 15 15
Selling, general and administrative
expenses 16 16
Other operating charges -- --
Operating Income (2) 10 12
Interest income 69 69
Interest expense 170 170
Equity income - net 24 14
Other income (loss) - net -- --
Income Before Income Taxes 16 13
Income taxes 25 5
Net Income 13 15
Diluted Net Income Per Share 15 15
Average Shares Outstanding - Diluted
Gross Margin
Operating Margin
Effective Tax Rate
-----------------------------
Three Months Ended September 29, 2006
----------------------------------------------------
Items Impacting Comparability
--------------------------------------
Certain After
Asset Tax Considering
Reported Impairments/ Equity Matters Items
(GAAP) Restructuring Investee (3) (Non-GAAP)
----------------------------------------------------
Net Operating
Revenues $6,454 $6,454
Cost of goods
sold 2,265 2,265
----------------------------------------------
Gross Profit 4,189 4,189
Selling,
general
and
administrative
expenses 2,488 2,488
Other operating
charges 39 ($39) -
----------------------------------------------
Operating
Income 1,662 39 1,701
Interest income 35 35
Interest
expense 47 47
Equity income -
net 231 $ 3 234
Other income
(loss) - net (55) (55)
----------------------------------------------
Income Before
Income Taxes 1,826 39 3 1,868
Income taxes 366 12 1 $ 41 420
----------------------------------------------
Net Income $1,460 $ 27 $ 2 ($41)$1,448
==============================================
Diluted Net
Income Per
Share $ 0.62 $ 0.01 $ 0.00 ($0.02)$ 0.62 (4)
==============================================
Average Shares
Outstanding -
Diluted 2,343 2,343 2,343 2,343 2,343
==============================================
Gross Margin 64.9% 64.9%
Operating
Margin 25.8% 26.4%
Effective Tax
Rate 20.0% 22.5%
----------------------------------------------
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) Net operating revenues excluding structural changes:
2007 2006 % Change
-------------------------------
Reported net
operating
revenues $7,690 $6,454 19%
Structural
changes (527) -- --
-------------------------------
Net operating
revenues
excluding
structural
changes $7,163 $6,454 11%
===============================
(2) Operating income for the three months ended September 28, 2007
includes a positive currency impact of approximately 3%. Ongoing,
currency neutral operating income growth is 9%.
(3) Primarily due to changes in reserves related to certain tax
matters.
(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 September 28, 2007 and September 29, 2006. 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 to Non-GAAP Financial Measures
----------------------------------------------------------------------
(UNAUDITED)
(In millions except per share data)
-------------------------------------
Nine Months Ended September 28, 2007
-----------------------------------------
Items Impacting
Comparability
----------------------------
Asset
Reported Impairments/ Equity
(GAAP) Restructuring Investees
-------------------------------------
Net Operating Revenues $21,526
Cost of goods sold 7,765 ($13)
-------------------------------------
Gross Profit 13,761 13
Selling, general and
administrative expenses 7,906
Other operating charges 129 (129)
-------------------------------------
Operating Income (2) 5,726 142
Interest income 150
Interest expense 300
Equity income - net 497 $ 141
Other income (loss) - net 177
-------------------------------------
Income Before Income Taxes 6,250 142 141
Income taxes 1,483 30 19
-------------------------------------
Net Income $ 4,767 $ 112 $ 122
=====================================
Diluted Net Income Per Share $ 2.05 $ 0.05 $ 0.05
=====================================
Average Shares Outstanding -
Diluted 2,326 2,326 2,326
=====================================
Gross Margin 63.9%
Operating Margin 26.6%
Effective Tax Rate 23.7%
-------------------------------------
---------------------------- --------- ------------
Nine Months Ended September
28, 2007
----------------------------
Items Impacting
Comparability
----------------
Gains % Change -
on Certain After % Change After
Sales Tax Considering - Considering
of Matters Items Reported Items
Assets (1) (Non-GAAP) (GAAP) (Non-GAAP)
---------------------------- --------- ------------
Net Operating
Revenues $21,526 19 19
Cost of goods sold 7,752 27 27
----------------------------
Gross Profit 13,774 14 14
Selling, general
and administrative
expenses 7,906 16 16
Other operating
charges - -- --
----------------------------
Operating Income
(2) 5,868 12 13
Interest income 150 (1) (1)
Interest expense 300 73 73
Equity income - net 638 (13) 14
Other income (loss)
- net ($209) (32) -- --
----------------------------
Income Before
Income Taxes (209) 6,324 10 11
Income taxes (104) ($37) 1,391 15 4
----------------------------
Net Income ($105) $ 37 $ 4,933 8 14
============================
Diluted Net Income
Per Share ($0.05) $ 0.02 $ 2.12 10 15
============================
Average Shares
Outstanding -
Diluted 2,326 2,326 2,326
============================
Gross Margin 64.0%
Operating Margin 27.3%
Effective Tax Rate 22.0%
---------------------------- --------- ------------
-------------------------------
Nine Months Ended September 29,
2006
--------------------------------
Items Impacting
Comparability
------------------------
Asset
Reported Impairments/ Equity
(GAAP) Restructuring Investee
-------------------------------
Net Operating Revenues $18,156
Cost of goods sold 6,101
-------------------------------
Gross Profit 12,055
Selling, general and administrative
expenses 6,844
Other operating charges 115 ($115)
-------------------------------
Operating Income 5,096 115
Interest income 152
Interest expense 173
Equity income - net 569 ($9)
Other income (loss) - net 48
-------------------------------
Income Before Income Taxes 5,692 115 (9)
Income taxes 1,290 20 -
-------------------------------
Net Income $ 4,402 $ 95 ($9)
===============================
Diluted Net Income Per Share $ 1.87 $ 0.04 $ 0.00
===============================
Average Shares Outstanding - Diluted 2,354 2,354 2,354
===============================
Gross Margin 66.4%
Operating Margin 28.1%
Effective Tax Rate 22.7%
-------------------------------
--------------------------------
Nine Months Ended September 29,
2006
--------------------------------
Items Impacting
Comparability
--------------------
Certain After
Tax Considering
Transaction Matters Items
Gains (1) (Non-GAAP)
--------------------------------
Net Operating Revenues $18,156
Cost of goods sold 6,101
--------------------------------
Gross Profit 12,055
Selling, general and
administrative expenses 6,844
Other operating charges -
--------------------------------
Operating Income 5,211
Interest income 152
Interest expense 173
Equity income - net 560
Other income (loss) - net ($123) (75)
--------------------------------
Income Before Income Taxes (123) 5,675
Income taxes 14 $ 9 1,333
--------------------------------
Net Income ($137) ($9) $ 4,342
================================
Diluted Net Income Per Share ($0.06) $ 0.00 $ 1.84 (3)
================================
Average Shares Outstanding -
Diluted 2,354 2,354 2,354
================================
Gross Margin 66.4%
Operating Margin 28.7%
Effective Tax Rate 23.5%
--------------------------------
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 due to changes in reserves related to certain tax
matters.
(2) Operating income for the nine months ended September 28, 2007
includes a positive currency impact of approximately 3%. Ongoing,
currency neutral operating income growth is 10%.
(3) 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 nine months ended September 28, 2007 and September 29, 2006. 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. Along with Coca-Cola, recognized as the world's most valuable brand, the Company markets four of the world's top five nonalcoholic sparkling brands, including Diet Coke, Fanta and Sprite, and a wide range of other beverages, including diet and light beverages, waters, juices and juice drinks, teas, coffees, energy and sports drinks. Through the world's largest beverage distribution system, consumers in more than 200 countries enjoy the Company's beverages at a rate exceeding 1.4 billion servings each day. For more information about The Coca-Cola Company, please visit our website at www.thecoca-colacompany.com.
Forward-Looking Statements
This press release may contain statements, estimates or projections that constitute "forward-looking statements" as defined under U.S. federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Coca-Cola Company's historical experience and our present expectations or projections. These risks include, but are not limited to, obesity concerns; scarcity and quality of water; changes in the nonalcoholic beverages business environment, including changes in consumer preferences based on health and nutrition considerations and obesity concerns; shifting consumer tastes and needs, changes in lifestyles and increased consumer information; increased competition; our ability to expand our operations in emerging markets; foreign currency and interest rate fluctuations; our ability to maintain good relationships with our bottling partners; the financial condition of our bottlers; our ability to maintain good labor relations, including our ability to renew collective bargaining agreements on satisfactory terms and avoid strikes or work stoppages; increase in the cost of energy; increase in cost, disruption of supply or shortage of raw materials; changes in laws and regulations relating to beverage containers and packaging, including mandatory deposit, recycling, eco-tax and/or product stewardship laws or regulations; adoption of significant additional labeling or warning requirements; unfavorable economic and political conditions in international markets, including civil unrest and product boycotts; changes in commercial or market practices and business model within the European Union; litigation uncertainties; adverse weather conditions; our ability to maintain brand image and product quality as well as other product issues such as product recalls; changes in legal and regulatory environments; changes in accounting standards and taxation requirements; our ability to achieve overall long-term goals; our ability to protect our information systems; additional impairment charges; our ability to successfully manage Company-owned bottling operations; global or regional catastrophic events; and other risks discussed in our Company's filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.
Source: The Coca-Cola Company
Released October 17, 2007