The Coca-Cola Company Reports Third Quarter and Year-to-Date 2008 Results
-- Third quarter EPS of $0.81, an increase of 14 percent; and $0.83 on a comparable basis, an increase of 17 percent.
-- Third quarter net revenue growth of 9 percent; and 11 percent excluding impact from the disposal of certain bottlers.
-- Worldwide unit case volume increased 5 percent in the quarter, led by 7 percent growth in International.
-- Global volume and value share gains continue.
-- Operating income increased 20 percent on a reported basis in the quarter; up 17 percent on a comparable basis.
ATLANTA--(BUSINESS WIRE)--
The Coca-Cola Company today reported third quarter earnings per share of $0.81, an increase of 14 percent versus the prior year quarter on a reported basis. After considering items impacting comparability, earnings per share in the quarter were $0.83, an increase of 17 percent. Earnings per share for the quarter included a net charge of $0.02 per share for restructuring charges and costs related to global productivity initiatives partially offset by a gain on the sale of a portion of the Company's investment in the Pakistan bottler. Earnings per share for the third quarter of 2007 were $0.71 and included a charge of $0.03 per share, 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.
"We once again demonstrated our ability to perform consistently, delivering our eighth consecutive quarter of double-digit comparable earnings growth, despite an incredibly challenging economic environment," said Muhtar Kent, president and chief executive officer, The Coca-Cola Company. "We are managing our business for the future with continued investment behind our brands and an increased focus on effectiveness and efficiency. These efforts support long-term growth while providing additional flexibility to enable sustainable results. Importantly, our strategies are working as we diligently work alongside our bottling partners to continue to deliver global volume and value share gains.
"Our system's ability to adapt to changing economic and consumer environments was key to our success during the quarter, and we believe that this adaptability will continue to be crucial to the business going forward. Our International operations, in particular the emerging markets, continue to drive our growth, more than offsetting the challenges that we are addressing in North America. We anticipate that the operating environment, especially in North America, will continue to be challenging as we finish 2008 and move into 2009. However, we have been diligent in taking the evolving landscape into account as we are planning for 2009, and believe that the solid fundamentals of our business, our strong balance sheet and cash generating capability, the experience of our management team and the strength of our brands will drive the business through these difficult economic times. With our continued focus on superior execution and driving productivity, I remain confident that the Coca-Cola system is well positioned for the future."
(All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.)
Financial Highlights
-- Third quarter net operating revenues increased 9 percent.
Revenue growth reflected a 3 percent increase in concentrate
sales, a 2 percent benefit from pricing and mix and a 6
percent positive currency impact, partially offset by a 2
percent decrease from structural changes primarily resulting
from the sale of certain bottlers.
-- Operating income in the quarter increased 20 percent on a
reported basis and 17 percent after considering items
impacting comparability. Items impacting comparability
negatively affected third quarter pre-tax operating income by
$47 million in 2008 and by $84 million in 2007. Currency
benefited operating income in the quarter by 9 percent.
-- The Company is on track for delivering $400 to $500 million in
annualized savings from productivity initiatives by year-end
2011 to provide additional flexibility to invest for growth.
Operational Highlights
(All references to unit case volume percentage changes in this section are computed based on average daily sales. Group operational highlights are reported in line with the Company's operating structure as described in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2008.)
Total Company
-- Unit case volume increased 5 percent in the third quarter and
4 percent year-to-date, successfully cycling 6 percent growth
in the prior year quarter and year-to-date periods.
Acquisitions contributed 1 point of unit case volume growth
for the quarter.
-- International operations delivered 7 percent unit case volume
growth in the quarter, successfully cycling 8 percent growth
in the prior year quarter. Emerging markets continued to drive
the results with China, Turkey, India, Southern Eurasia,
Pakistan, Nigeria and Korea delivering double-digit unit case
volume growth and Brazil, Eastern Europe, North and West
Africa and the Middle East delivering high single-digit unit
case volume growth. Europe achieved solid unit case volume
growth of 3 percent in the quarter and unit case volume in
Japan increased 1 percent. North America unit case volume
declined 2 percent in the quarter.
-- The Company continued to achieve solid growth in sparkling
beverages, which increased unit case volume 3 percent in the
quarter. Key brands drove the results with Trademarks
Coca-Cola, Fanta and Sprite increasing unit case volume 2, 5
and 7 percent, respectively, in the quarter.
-- Still beverage unit case volume increased 10 percent in the
quarter, led by strong growth across the Company's still brand
portfolio, including juice and juice drink, tea, coffee,
active lifestyle and water brands.
-- Globally, the Company gained volume and value share in
nonalcoholic ready-to-drink beverages as well as in core
sparkling and still beverage categories.
Eurasia and Africa
-------------------
Percent Change
From Prior Year
----------------------------------
Third Year-
Quarter To-Date
----------------------------------
Unit Case Volume 9% 7%
Net Revenues 17% 19%
Operating Income 34% 41%
-- The Eurasia and Africa Group's unit case volume increased 9
percent in the quarter, successfully cycling 13 percent growth
in the prior year quarter. Net revenues for the quarter
increased 17 percent, benefiting from an 8 percent increase in
concentrate sales and positive pricing and mix with negligible
impact from currency. Operating income growth in the quarter
of 34 percent reflected the benefit of the net revenue
increase, the continued investment in key business initiatives
and the cycling of restructuring charges in the prior year.
-- The group delivered solid unit case volume growth across most
markets in the quarter, with double-digit growth in key
markets including Turkey, India, Southern Eurasia and Nigeria
and high single-digit growth in the Middle East and North and
West Africa. In the quarter, Russia's unit case volume
declined 3 percent, primarily reflecting the impact from
continuing adverse weather conditions as well as a more
challenging economic environment, and South Africa was up 1
percent. Share gains continued for the group led by volume and
value share gains in Russia and Turkey in nonalcoholic
ready-to-drink beverages.
Europe
------------
Percent Change
From Prior Year
---------------------------------------
Third Year-
Quarter To-Date
---------------------------------------
Unit Case Volume 3% 2%
Net Revenues 10% 13%
Operating Income 14% 14%
-- Unit case volume in the Europe Group increased 3 percent in
the quarter. Net revenues for the quarter increased 10
percent, reflecting even concentrate sales, positive pricing
and mix and a high single-digit currency benefit. Operating
income increased 14 percent in the quarter primarily
reflecting the higher net revenues while continuing to invest
behind key marketing initiatives across the group.
-- Unit case volume results were driven by mid single-digit
growth in Northwest Europe and high single-digit growth in
Eastern Europe. Europe delivered balanced growth with unit
case volume for sparkling beverages up 3 percent and for still
beverages up 9 percent. Key countries across the group
including Germany, Great Britain and France gained volume and
value share in nonalcoholic ready-to-drink beverages.
Latin America
-------------
Percent Change
From Prior Year
------------------------------------
Third Year-
Quarter To-Date
------------------------------------
Unit Case Volume 8% 8%
Net Revenues 24% 24%
Operating Income 30% 27%
-- The Latin America Group continued to deliver strong unit case
volume growth of 8 percent in the quarter, successfully
cycling 9 percent growth in the prior year quarter. Net
revenues increased 24 percent in the quarter, reflecting a 5
percent increase in concentrate sales, positive pricing and
mix and a low double-digit currency benefit. Operating income
increased 30 percent in the quarter, reflecting the net
revenue increase while continuing to invest in key marketing
initiatives.
-- Solid unit case volume growth across the group and the benefit
of acquisitions drove the results for the quarter.
Acquisitions contributed 3 points of the overall unit case
volume growth. Mexico, Brazil and Argentina achieved strong
unit case volume growth of 7, 7 and 5 percent, respectively,
in the quarter and led to volume and value share gains for the
group in both sparkling and still beverages.
North America
--------------
Percent Change
From Prior Year
-------------------------------
Third Year-
Quarter To-Date
-------------------------------
Unit Case Volume (2%) (1%)
Net Revenues (2%) 6%
Operating Income (12%) (9%)
-- Unit case volume in the North America Group declined 2 percent
in the quarter, reflecting the continuing difficult U.S.
economic environment. Retail unit case volume declined 1
percent and Foodservice and Hospitality declined 3 percent.
Net revenues for the quarter decreased 2 percent, reflecting a
3 percent decrease in concentrate sales, partially offset by
positive pricing and mix of finished goods. Operating income
decreased 12 percent in the quarter reflecting the decrease in
net revenues, higher input costs in the finished goods
businesses, unfavorable mix and continued investment behind
strategic marketing programs.
-- Sparkling beverage unit case volume declined 2 percent in the
quarter. Core sparkling beverages gained volume and value
share reflecting the benefits of the strong, integrated
Olympics program in the quarter. The continued successful
execution of the three-cola strategy resulted in Coca-Cola
Classic, Diet Coke and Coca-Cola Zero combined gaining volume
and value share in the U.S. Coca-Cola Zero continued to
deliver strong performance, increasing unit case volume 30
percent in the quarter, cycling strong double-digit growth in
the prior year quarter.
-- Still beverage unit case volume was even in the quarter and
achieved volume and value share gains, due to the continued
strong performance of glaceau and Fuze as well as strong
growth in chilled warehouse juices and juice drinks behind the
success of Trademark Simply and Minute Maid Enhanced Juices.
Pacific
--------
Percent Change
From Prior Year
---------------------------------
Third Year-
Quarter To-Date
---------------------------------
Unit Case Volume 7% 7%
Net Revenues 6% 9%
Operating Income 15% 14%
-- The Pacific Group increased unit case volume 7 percent in the
quarter, successfully cycling 11 percent growth in the prior
year quarter. Net revenues increased 6 percent, reflecting a 9
percent increase in concentrate sales, positive pricing and a
high single-digit currency benefit, partially offset by
unfavorable country mix. Operating income increased 15 percent
reflecting the increase in net revenues while investing in key
business initiatives, including the Olympics activation.
-- In Japan, unit case volume increased 1 percent in the quarter,
successfully cycling 4 percent growth in the prior year
quarter, while achieving value share gains in nonalcoholic
ready-to-drink beverages. Trademark Coca-Cola delivered unit
case volume growth of 6 percent driven by the continued
success of Coca-Cola Zero and the execution of the three-cola
strategy. Georgia Coffee unit case volume increased 4 percent
in the quarter and 3 percent year-to-date, its fourth
consecutive quarter of growth led by growth in core flavors.
Unit case volume declines in Sokenbicha and Aquarius reflected
unfavorable weather in the quarter.
-- In China, unit case volume increased 17 percent in the
quarter, successfully cycling 20 percent growth in the prior
year quarter. The results were led by double-digit unit case
volume growth in Trademark Coca-Cola, Trademark Sprite and
Minute Maid along with the successful launch of Yuan Ye, an
original green leaf tea. The strong performance across the
brands, supported by the successful execution of a fully
integrated Olympics program, resulted in volume and value
share gains in both sparkling and still beverages. In the
third quarter, the Company announced its intention to purchase
China Huiyuan Juice Group Limited for a total value of
approximately $2.4 billion and continues to work with the
local regulatory authorities to secure the necessary
approvals.
-- In the Philippines, unit case volume declined 9 percent in the
quarter, reflecting the continuing pressure from the impact of
food and fuel inflation on consumer discretionary spending as
well as poor weather conditions. Despite the unit case volume
decline, as a result of refocused marketing and successful
in-market execution, volume and value share gains were
achieved in nonalcoholic ready-to-drink beverages and in
sparkling beverages.
Bottling Investments
----------------------
Percent Change
From Prior Year
----------------------------
Third Year-
Quarter To-Date
----------------------------
Unit Case Volume 7% 19%
Net Revenues 12% 27%
Operating Income 14% 82%
-- The Bottling Investments Group's unit case volume increased 7
percent in the quarter, reflecting growth across most of the
group, partially offset by the impact of structural changes.
Net revenues increased 12 percent in the quarter as a result
of the unit case volume increase, a high single-digit currency
benefit and structural changes. Operating income increased 14
percent in the quarter reflecting the net revenue increase and
the benefits of supply chain efficiencies and controlled
operating expenses, partially offset by continued investments
to enhance market execution capabilities and higher input
costs.
Financial Review
Operating Results
Net operating revenues in the quarter increased 9 percent, reflecting a 3 percent increase in concentrate sales, a 2 percent benefit from pricing and mix and a 6 percent positive currency impact, partially offset by a 2 percent decrease from structural changes resulting primarily from the sale of certain bottlers.
Cost of goods sold increased 5 percent in the quarter, reflecting a 3 percent increase in concentrate sales, a 5 percent increase from currency and increases in commodity-based input and freight costs, partially offset by a 4 percent decrease from structural changes resulting primarily from the sale of certain bottlers.
Selling, general and administrative expenses in the quarter increased 8 percent reflecting a 6 percent increase from currency. The Company continued to achieve expense leverage through investing in marketing to support brand growth while effectively managing general and administrative expenses through productivity initiatives.
The Company had other operating charges in the quarter of $47 million related to restructuring charges and costs related to global productivity initiatives.
Operating income in the quarter increased 20 percent, reflecting the growth in net revenues, the investments in marketing and effective management of general and administrative expenses. After considering items impacting comparability, operating income increased 17 percent. Currency increased operating income in the quarter by 9 percent. Based on current expectations of market rates for the remainder of the year and benefits of hedging coverage in place, the Company continues to expect at least a mid single-digit favorable currency impact on full year 2008 operating income.
In the quarter, the Company recorded a gain of $16 million on the sale of a portion of the Company's investment in the Pakistan bottler to Coca-Cola Icecek A.S.
Effective Tax Rate
The reported effective tax rate for the quarter was 22.7 percent and the underlying effective tax rate on operations for the quarter was 22.0 percent. The variance between the reported rate and the underlying rate was due to the tax impact of various separately disclosed items impacting comparability.
The Company anticipates that its underlying effective tax rate on operations for the full year 2008 will be 22.0 percent. The Company's estimated underlying effective tax rate does not reflect the impact of discrete events, which, if and when they occur, are separately recognized in the appropriate period.
New Operating Structure
As previously communicated, effective July 1, 2008, the Company made certain changes to its operating structure to align geographic responsibility. The European Union Group was reconfigured to include the Adriatic and Balkans Region and was renamed the Europe Group; and the remaining Eurasia Group was combined with the Africa Group into the new Eurasia and Africa Group. The changes in operating structure did not impact the other existing geographic operating segments, Bottling Investments or Corporate. Reporting on the new structure began this quarter. Reclassified operating segment information can be found in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2008.
Items Impacting Prior Year Results
In 2007, the third quarter results included a $0.03 per share charge primarily related to restructuring charges which was offset by a $0.03 per share gain primarily related to the sale of a portion of the Company's investment in Coca-Cola Amatil Limited. In 2007, the second quarter results included a net charge of $0.05 per share primarily related to restructuring charges and a non-cash impairment charge at an equity investee. In 2007, the first quarter results included a net charge of $0.02 per share primarily related to an asset write-off in the Philippines bottler, partially offset by gains on the sales of the equity interest in a Brazil bottler and real estate in Spain.
Conference Call
The Company will host a conference call with investors and analysts to discuss the third quarter results today at 8:30 a.m. (EDT). The Company invites investors to listen to the live audiocast of the conference call at the Company's Web site, www.thecoca-colacompany.com in the "Investors" section. A replay in downloadable MP3 format will also be available within 24 hours after the audiocast on the Company's Web site. Further, the "Investors" section of the Company's Web site includes a reconciliation of non-GAAP financial measures that may be used periodically by management when discussing the Company's financial results with investors and analysts to our results as reported under GAAP.
THE COCA-COLA COMPANY AND SUBSIDIARIES
----------------------------------------------------------------------
Condensed Consolidated Statements of Income
----------------------------------------------------------------------
(UNAUDITED)
(In millions except per share data)
Three Months Ended
--------------------------------------
September 26, September 28,
2008 2007 % Change
------------- ------------- ---------
Net Operating Revenues $ 8,393 $ 7,690 9
Cost of goods sold 3,020 2,884 5
----------- -------------
Gross Profit 5,373 4,806 12
Selling, general and
administrative expenses 3,139 2,896 8
Other operating charges 47 81 --
------------- -------------
Operating Income 2,187 1,829 20
Interest income 105 59 78
Interest expense 111 127 (13)
Equity income - net 272 287 (5)
Other income (loss) - net (8) 65 --
------------- -------------
Income Before Income Taxes 2,445 2,113 16
Income taxes 555 459 21
------------- -------------
Net Income $ 1,890 $ 1,654 14
============= =============
Diluted Net Income Per Share(a) $ 0.81 $ 0.71 14
============= =============
Average Shares Outstanding -
Diluted(a) 2,329 2,331
============= =============
(a) For the third quarter, "Basic Net Income Per Share" was $0.82 for
2008 and $0.72 for 2007 based on "Average Shares Outstanding - Basic"
of 2,311 and 2,311 for 2008 and 2007, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
----------------------------------------------------------------------
Nine Months Ended
---------------------------------------
September 26, September 28,
2008 2007 % Change
-------------- ------------- --------
Net Operating Revenues $ 24,818 $21,526 15
Cost of goods sold 8,806 7,765 13
-------------- -------------
Gross Profit 16,012 13,761 16
Selling, general and
administrative expenses 9,030 7,906 14
Other operating charges 242 129 --
-------------- -------------
Operating Income 6,740 5,726 18
Interest income 239 150 59
Interest expense 317 300 6
Equity income (loss) - net (434) 497 --
Other income - net 61 177 --
-------------- -------------
Income Before Income Taxes 6,289 6,250 1
Income taxes 1,477 1,483 0
-------------- -------------
Net Income $ 4,812 $ 4,767 1
============== =============
Diluted Net Income Per Share(a) $ 2.06 $ 2.05 0
============== =============
Average Shares Outstanding -
Diluted(a) 2,341 2,326
============== =============
(a) For the nine months, "Basic Net Income Per Share" was $2.08 for
2008 and $2.06 for 2007 based on "Average Shares Outstanding - Basic"
of 2,316 and 2,312 for 2008 and 2007, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(UNAUDITED)
(In millions except par value)
----------------------------------------------------------------------
September 26, December 31,
2008 2007
-------------- --------------
Assets
----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 7,797 $ 4,093
Marketable securities 287 215
Trade accounts receivable, less
allowances of $61 and $56, respectively 3,674 3,317
Inventories 2,321 2,220
Prepaid expenses and other assets 2,741 2,260
---------- ----------
Total Current Assets 16,820 12,105
---------- ----------
Investments
Equity method investments 6,891 7,289
Cost method investments, principally
bottling companies 530 488
---------- ----------
Total Investments 7,421 7,777
---------- ----------
Other Assets 2,625 2,675
Property, Plant and Equipment - net 8,527 8,493
Trademarks With Indefinite Lives 6,138 5,153
Goodwill 4,011 4,256
Other Intangible Assets 2,638 2,810
---------- ----------
Total Assets $ 48,180 $ 43,269
========== ==========
Liabilities and Shareowners' Equity
----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 7,659 $ 6,915
Loans and notes payable 8,111 5,919
Current maturities of long-term debt 536 133
Accrued income taxes 281 258
---------- ----------
Total Current Liabilities 16,587 13,225
---------- ----------
Long-Term Debt 2,877 3,277
Other Liabilities 2,803 3,133
Deferred Income Taxes 2,168 1,890
Shareowners' Equity
Common stock, $0.25 par value;
Authorized - 5,600 shares; Issued -
3,519 shares and 3,519 shares,
respectively 880 880
Capital surplus 7,927 7,378
Reinvested earnings 38,397 36,235
Accumulated other comprehensive income
(loss) 759 626
Treasury stock, at cost - 1,207 shares
and 1,201 shares, respectively (24,218) (23,375)
---------- ----------
Total Shareowners' Equity 23,745 21,744
---------- ----------
Total Liabilities and Shareowners' Equity $ 48,180 $ 43,269
========== ==========
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
(In millions)
---------------------------------------------------------------------
Nine Months Ended
----------------------------
September 26, September 28,
2008 2007
---------------------------
Operating Activities
Net income $ 4,812 $ 4,767
Depreciation and amortization 943 794
Stock-based compensation expense 223 241
Deferred income taxes (221) (67)
Equity income or loss, net of dividends 638 (331)
Foreign currency adjustments (39) 6
Gains on sales of assets, including
bottling interests (128) (213)
Other operating charges 141 129
Other items 57 59
Net change in operating assets and
liabilities (758) 72
------------ -------------
Net cash provided by operating
activities 5,668 5,457
------------ -------------
Investing Activities
Acquisitions and investments, principally
trademarks and bottling companies (655) (3,935)
Purchases of other investments (212) (29)
Proceeds from disposals of other
investments 454 266
Purchases of property, plant and
equipment (1,370) (1,091)
Proceeds from disposals of property,
plant and equipment 46 179
Other investing activities (57) (2)
------------ -------------
Net cash used in investing activities (1,794) (4,612)
------------ -------------
Financing Activities
Issuances of debt 5,308 7,094
Payments of debt (3,211) (3,599)
Issuances of stock 570 1,013
Purchases of stock for treasury (1,079) (1,699)
Dividends (1,764) (1,575)
------------ -------------
Net cash (used in) provided by
financing activities (176) 1,234
------------ -------------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 6 97
------------ -------------
Cash and Cash Equivalents
Net increase during the period 3,704 2,176
Balance at beginning of period 4,093 2,440
------------ -------------
Balance at end of period $ 7,797 $ 4,616
============ =============
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Three Months Ended
---------------------------------------------------------------------
Net Operating Revenues Operating Income (Loss)
----------------------------------------------------------------------
SeptemberSeptember SeptemberSeptember
26, 2008 28, 2007% Fav. / 26, 2008 28, 2007% Fav. /
(1) (5) (Unfav.) (2) (6) (Unfav.)
----------------------------------------------------------------------
Eurasia &
Africa $ 592 $ 504 17 $ 180 $ 134 34
Europe 1,529 1,384 10 796 698 14
Latin America 1,033 835 24 559 430 30
North America 2,152 2,186 (2) 392 447 (12)
Pacific 1,276 1,206 6 491 428 15
Bottling
Investments 2,309 2,058 12 66 58 14
Corporate 34 17 100 (297) (366) 19
Eliminations (532) (500) -- - - --
-------------------------------------------------------
Consolidated $8,393 $7,690 9 $2,187 $1,829 20
----------------------------------------------------------------------
Income (Loss) Before Income Taxes
----------------------------------------------------------------------
September 26, September 28,
2008 2007 % Fav. /
(2), (3), (4) (6), (7), (8) (Unfav.)
----------------------------------------------------------------------
Eurasia & Africa $ 166 $ 144 15
Europe 811 708 15
Latin America 553 430 29
North America 396 452 (12)
Pacific 486 424 15
Bottling Investments 319 308 4
Corporate (286) (353) 19
Eliminations - - --
---------------------------------------------
Consolidated $ 2,445 $ 2,113 16
----------------------------------------------------------------------
Note: Refer to the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 8, 2008 for more
information on the changes to the Company's operating structure.
(1) Intersegment revenues for the three months ended September 26,
2008 were $52 million for Eurasia and Africa, $280 million for
Europe, $44 million for Latin America, $17 million for North America,
$84 million for Pacific and $55 million for Bottling Investments.
(2) Operating income (loss) and income (loss) before income taxes for
the three months ended September 26, 2008 were reduced by
approximately $1 million for Latin America, $6 million for North
America, $12 million for Bottling Investments and $28 million for
Corporate, as a result of restructuring costs and productivity
initiatives.
(3) Income (loss) before income taxes for the three months ended
September 26, 2008 benefited from a gain of approximately $16 million
for Corporate on the sale of 49 percent of our interest in Coca-Cola
Beverages Pakistan Ltd. to Coca-Cola Icecek A.S.
(4) Income (loss) before income taxes for the three months ended
September 26, 2008 was decreased by approximately a net $3 million
for Bottling Investments, primarily due to our proportionate share of
restructuring charges recorded by equity method investees.
(5) Intersegment revenues for the three months ended September 28,
2007 were $45 million for Eurasia and Africa, $231 million for
Europe, $44 million for Latin America, $26 million for North America,
$112 million for Pacific and $42 million for Bottling Investments.
(6) Operating income (loss) and income (loss) before income taxes for
the three months ended September 28, 2007 were reduced by
approximately $15 million for Eurasia and Africa, $7 million for
Europe, $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 and asset write-downs.
(7) Income (loss) before income taxes for the three months ended
September 28, 2007 benefited from a gain of approximately $73 million
for Corporate on the sale of Coca-Cola Amatil Limited shares.
(8) Income (loss) before income taxes for the three months ended
September 28, 2007 benefited from a net gain of approximately $21
million for Bottling Investments, primarily due to our proportionate
share of tax benefits recorded by an equity method investee, which
was partially offset by asset write-downs and restructuring charges
recorded by equity method investees.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Nine Months Ended
----------------------------------------------------------------------
Net Operating Revenues Operating Income (Loss)
----------------------------------------------------------------------
SeptemberSeptember SeptemberSeptember
26, 2008 28, 2007% Fav. / 26, 2008 28, 2007% Fav. /
(1) (5) (Unfav.) (2) (6) (Unfav.)
----------------------------------------------------------------------
Eurasia & Africa $ 1,820 $ 1,530 19 $ 676 $ 479 41
Europe 4,626 4,078 13 2,547 2,226 14
Latin America 2,894 2,333 24 1,596 1,258 27
North America 6,306 5,950 6 1,173 1,294 (9)
Pacific 3,604 3,315 9 1,483 1,306 14
Bottling
Investments 7,099 5,591 27 239 131 82
Corporate 91 49 86 (974) (968) (1)
Eliminations (1,622) (1,320) -- - - --
------------------------------------------------------
Consolidated $24,818 $21,526 15 $6,740 $5,726 18
----------------------------------------------------------------------
Income (Loss) Before Income Taxes
----------------------------------------------------------------------
September 26, September 28,
2008 2007 % Fav. /
(2), (3), (4) (6), (7), (8) (Unfav.)
----------------------------------------------------------------------
Eurasia & Africa $ 660 $ 500 32
Europe 2,580 2,251 15
Latin America 1,591 1,257 27
North America 1,183 1,298 (9)
Pacific 1,466 1,288 14
Bottling Investments (237) 562 0
Corporate (954) (906) (5)
Eliminations - - --
-----------------------------------------------
Consolidated $ 6,289 $ 6,250 1
----------------------------------------------------------------------
Note: Refer to the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 8, 2008 for more
information on the changes to the Company's operating structure.
(1) Intersegment revenues for the nine months ended September 26, 2008
were $159 million for Eurasia and Africa, $810 million for Europe,
$164 million for Latin America, $47 million for North America, $272
million for Pacific and $170 million for Bottling Investments.
(2) Operating income (loss) and income (loss) before income taxes for
the nine months ended September 26, 2008 were reduced by
approximately $1 million for Latin America, $12 million for North
America, $25 million for Bottling Investments and $204 million for
Corporate, primarily due to restructuring costs, contract termination
costs, asset write-downs and productivity initiatives.
(3) Income (loss) before income taxes for the nine months ended
September 26, 2008 was reduced by approximately $1.1 billion for
Bottling Investments, primarily as a result of our proportionate
share of an impairment charge recorded by CCE.
(4) Income (loss) before income taxes for the nine months ended
September 26, 2008 was increased by approximately $118 million for
Bottling Investments and Corporate, primarily due to the gain on the
sale of Refrigerantes Minas Gerais Ltda.
(5) Intersegment revenues for the nine months ended September 28, 2007
were $134 million for Eurasia and Africa, $615 million for Europe,
$104 million for Latin America, $63 million for North America, $297
million for Pacific and $107 million for Bottling Investments.
(6) Operating income (loss) and income (loss) before income taxes for
the nine months ended September 28, 2007 were reduced by
approximately $35 million for Eurasia and Africa, $12 million for
Europe, $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.
(7) Income (loss) before income taxes for the nine months ended
September 28, 2007 was reduced by approximately $141 million for
Bottling Investments, primarily due to our proportionate share of
asset write-downs and restructuring charges recorded by equity method
investees.
(8) Income (loss) before income taxes for the nine months ended
September 28, 2007 benefited from gains of approximately $209 million
for Corporate, primarily due to the sale of real estate in Spain, the
sale of our equity ownership in Vonpar Refrescos S. A. and the sale
of Coca-Cola Amatil Limited shares.
THE COCA-COLA COMPANY AND SUBSIDIARIES
----------------------------------------------------------------------
Reconciliation of GAAP and Non-GAAP Financial Measures
----------------------------------------------------------------------
(UNAUDITED)
(In millions except per share data)
--------------------------------------------
Three Months Ended September 26, 2008
-------------------------------------------------
Items Impacting Comparability
-----------------------------------------
Asset
Reported Impairments/Productivity Equity
(GAAP) Restructuring Initiatives Investees
--------------------------------------------
Net Operating
Revenues $8,393
Cost of goods sold 3,020
--------------------------------------------
Gross Profit 5,373
Selling, general and
administrative
expenses 3,139
Other operating
charges 47 ($35) ($12)
--------------------------------------------
Operating Income 2,187 35 12
Interest income 105
Interest expense 111
Equity income - net 272 $ 3
Other income (loss) -
net (8)
--------------------------------------------
Income Before Income
Taxes 2,445 35 12 3
Income taxes 555 7 6 (21)
--------------------------------------------
Net Income $1,890 $ 28 $ 6 $ 24
============================================
Diluted Net Income
Per Share $ 0.81 $ 0.01 $ 0.00 $ 0.01
============================================
Average Shares
Outstanding -
Diluted 2,329 2,329 2,329 2,329
============================================
Gross Margin 64.0%
Operating Margin 26.1%
Effective Tax Rate 22.7%
--------------------------------------------
--------------------------------
Three Months Ended September 26,
2008
--------------------------------
Items Impacting
Comparability
--------------------
Certain After
Tax Considering
Transaction Matters Items
Gains (1) (Non-GAAP)
--------------------------------
Net Operating Revenues $8,393
Cost of goods sold 3,020
--------------------------------
Gross Profit 5,373
Selling, general and administrative
expenses 3,139
Other operating charges -
--------------------------------
Operating Income 2,234
Interest income 105
Interest expense 111
Equity income - net 275
Other income (loss) - net ($16) (24)
--------------------------------
Income Before Income Taxes (16) 2,479
Income taxes 3 ($5) 545
--------------------------------
Net Income ($19) $ 5 $1,934
================================
Diluted Net Income Per Share ($0.01) $ 0.00 $ 0.83 (5)
================================
Average Shares Outstanding -
Diluted 2,329 2,329 2,329
================================
Gross Margin 64.0%
Operating Margin 26.6%
Effective Tax Rate 22.0%
--------------------------------
------------- -------------
% Change -
After
% Change - Considering
Reported Items
(GAAP) (Non-GAAP)
------------- -------------
Net Operating Revenues 9 9 (2)
Cost of goods sold 5 5
Gross Profit 12 12 (3)
Selling, general and administrative
expenses 8 8
Other operating charges -- --
Operating Income 20 17 (3), (4)
Interest income 78 78
Interest expense (13) (13)
Equity income - net (5) 3
Other income (loss) - net -- --
Income Before Income Taxes 16 18
Income taxes 21 24
Net Income 14 16
Diluted Net Income Per Share 14 17
Average Shares Outstanding -
Diluted
Gross Margin
Operating Margin
Effective Tax Rate
------------- -------------
----------------------------------------
Three Months Ended September 28, 2007
------------------------------------------------
Items Impacting Comparability
----------------------------------------
Gains on
Asset Sales
Reported Impairments/ Equity of
(GAAP) Restructuring Investees Assets
----------------------------------------
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 1,829 84
Interest income 59
Interest expense 127
Equity income - net 287 ($21)
Other income (loss) -
net 65 ($73)
----------------------------------------
Income Before Income
Taxes 2,113 84 (21) (73)
Income taxes 459 16 (7) (31)
----------------------------------------
Net Income $1,654 $ 68 ($14) ($42)
========================================
Diluted Net Income Per
Share $ 0.71 $ 0.03 ($0.01) ($0.02)
========================================
Average Shares
Outstanding - Diluted 2,331 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
---------------
After
Considering
Certain Tax Items
Matters (1) (Non-GAAP)
---------------------------
Net Operating Revenues $7,690
Cost of goods sold 2,881
---------------------------
Gross Profit 4,809
Selling, general and administrative
expenses 2,896
Other operating charges -
---------------------------
Operating Income 1,913
Interest income 59
Interest expense 127
Equity income - net 266
Other income (loss) - net (8)
---------------------------
Income Before Income Taxes 2,103
Income taxes $ 4 441
---------------------------
Net Income ($4) $1,662
===========================
Diluted Net Income Per Share $ 0.00 $ 0.71
===========================
Average Shares Outstanding - Diluted 2,331 2,331
===========================
Gross Margin 62.5%
Operating Margin 24.9%
Effective Tax Rate 21.0%
---------------------------
Note: Items to consider for comparability include primarily charges,
gains, and accounting changes. Charges and accounting changes
negatively impacting net income are reflected as increases to
reported net income. Gains and accounting changes positively
impacting net income are reflected as deductions to reported net
income.
(1) Primarily related to changes in reserves related to certain tax
matters.
(2) Net operating revenues excluding structural changes:
2008 2007 % Change
------------------------
Reported net operating
revenues $8,393 $7,690 9%
Structural changes (166) (257) --
------------------------
Net operating revenues
excluding structural changes $8,227 $7,433 11%
========================
(3) Operating expense leverage after considering items impacting
comparability for the three months ended September 26, 2008 is 5%,
which is calculated by subtracting gross profit growth after
considering items impacting comparability of 12% from operating
income growth after considering items impacting comparability of 17%.
(4) Operating income after considering items impacting comparability
for the three months ended September 26, 2008 includes a positive
currency impact of approximately 9%. Currency neutral operating
income growth after considering items impacting comparability is 8%.
(5) 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 26, 2008 and September 28, 2007. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
THE COCA-COLA COMPANY AND SUBSIDIARIES
----------------------------------------------------------------------
Reconciliation of GAAP and Non-GAAP Financial Measures
----------------------------------------------------------------------
(UNAUDITED)
(In millions except per share data)
--------------------------------------------
Nine Months Ended September 26, 2008
-------------------------------------------------
Items Impacting Comparability
-----------------------------------------
Asset
Reported Impairments/Productivity Equity
(GAAP) Restructuring Initiatives Investees
--------------------------------------------
Net Operating
Revenues $24,818
Cost of goods sold 8,806
--------------------------------------------
Gross Profit 16,012
Selling, general and
administrative
expenses 9,030
Other operating
charges 242 ($218) ($24)
--------------------------------------------
Operating Income 6,740 218 24
Interest income 239
Interest expense 317
Equity income - net (434) $1,130
Other income (loss) -
net 61
--------------------------------------------
Income Before Income
Taxes 6,289 218 24 1,130
Income taxes 1,477 43 9 195
--------------------------------------------
Net Income $ 4,812 $ 175 $ 15 $ 935
============================================
Diluted Net Income
Per Share $ 2.06 $ 0.07 $ 0.01 $ 0.40
============================================
Average Shares
Outstanding -
Diluted 2,341 2,341 2,341 2,341
============================================
Gross Margin 64.5%
Operating Margin 27.2%
Effective Tax Rate 23.5%
--------------------------------------------
--------------------------------
Nine Months Ended September 26,
2008
--------------------------------
Items Impacting
Comparability
--------------------
Certain After
Tax Considering
Transaction Matters Items
Gains (1) (Non-GAAP)
--------------------------------
Net Operating Revenues $24,818
Cost of goods sold 8,806
--------------------------------
Gross Profit 16,012
Selling, general and administrative
expenses 9,030
Other operating charges -
--------------------------------
Operating Income 6,982
Interest income 239
Interest expense 317
Equity income - net 696
Other income (loss) - net ($118) (57)
--------------------------------
Income Before Income Taxes (118) 7,543
Income taxes (29) ($36) 1,659
--------------------------------
Net Income ($89) $ 36 $ 5,884
================================
Diluted Net Income Per Share ($0.04) $ 0.02 $ 2.51 (5)
================================
Average Shares Outstanding -
Diluted 2,341 2,341 2,341
================================
Gross Margin 64.5%
Operating Margin 28.1%
Effective Tax Rate 22.0%
--------------------------------
--------- ------------
% Change -
% Change After
- Considering
Reported Items
(GAAP) (Non-GAAP)
--------- ------------
Net Operating Revenues 15 15(2)
Cost of goods sold 13 14
Gross Profit 16 16(3)
Selling, general and administrative
expenses 14 14
Other operating charges -- --
Operating Income 18 19(3), (4)
Interest income 59 59
Interest expense 6 6
Equity income - net -- 9
Other income (loss) - net -- --
Income Before Income Taxes 1 19
Income taxes 0 19
Net Income 1 19
Diluted Net Income Per Share 0 18
Average Shares Outstanding - Diluted
Gross Margin
Operating Margin
Effective Tax Rate
--------- ------------
----------------------------------------
Nine Months Ended September 28, 2007
----------------------------------------------
Items Impacting Comparability
--------------------------------------
Gains on
Asset Sales
Reported Impairments/ Equity of
(GAAP) Restructuring Investees Assets
----------------------------------------
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 5,726 142
Interest income 150
Interest expense 300
Equity income - net 497 $ 141
Other income (loss) -
net 177 ($209)
----------------------------------------
Income Before Income
Taxes 6,250 142 141 (209)
Income taxes 1,483 30 19 (104)
----------------------------------------
Net Income $ 4,767 $ 112 $ 122 ($105)
========================================
Diluted Net Income Per
Share $ 2.05 $ 0.05 $ 0.05 ($0.05)
========================================
Average Shares
Outstanding - Diluted 2,326 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
---------------
After
Considering
Certain Tax Items
Matters (1) (Non-GAAP)
---------------------------
Net Operating Revenues $21,526
Cost of goods sold 7,752
---------------------------
Gross Profit 13,774
Selling, general and administrative
expenses 7,906
Other operating charges -
---------------------------
Operating Income 5,868
Interest income 150
Interest expense 300
Equity income - net 638
Other income (loss) - net (32)
---------------------------
Income Before Income Taxes 6,324
Income taxes ($37) 1,391
---------------------------
Net Income $ 37 $ 4,933
===========================
Diluted Net Income Per Share $ 0.02 $ 2.12
===========================
Average Shares Outstanding - Diluted 2,326 2,326
===========================
Gross Margin 64.0%
Operating Margin 27.3%
Effective Tax Rate 22.0%
---------------------------
Note: Items to consider for comparability include primarily charges,
gains, and accounting changes. Charges and accounting changes
negatively impacting net income are reflected as increases to
reported net income. Gains and accounting changes positively
impacting net income are reflected as deductions to reported net
income.
(1) Primarily related to changes in reserves related to certain tax
matters.
(2) Net operating revenues excluding structural changes:
2008 2007 % Change
--------------------------
Reported net operating
revenues $24,818 $21,526 15%
Structural changes (912) (554) --
--------------------------
Net operating revenues
excluding structural
changes $23,906 $20,972 14%
==========================
(3) Operating expense leverage after considering items impacting
comparability for the nine months ended September 26, 2008 is 3%,
which is calculated by subtracting gross profit growth after
considering items impacting comparability of 16% from operating
income growth after considering items impacting comparability of 19%.
(4) Operating income after considering items impacting comparability
for the nine months ended September 26, 2008 includes a positive
currency impact of approximately 10%. Currency neutral operating
income growth after considering items impacting comparability is 9%.
(5) 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 26, 2008 and September 28, 2007. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
The Coca-Cola Company
The Coca-Cola Company is the world's largest beverage company, refreshing consumers with more than 450 sparkling and still brands. Along with Coca-Cola, recognized as the world's most valuable brand, the Company's portfolio includes 12 other billion dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid and Georgia Coffee. Globally, we are the No. 1 provider of sparkling beverages, juices and juice drinks and ready-to-drink teas and coffees. Through the world's largest beverage distribution system, consumers in more than 200 countries enjoy the Company's beverages at a rate of 1.5 billion servings a day. With an enduring commitment to building sustainable communities, our Company is focused on initiatives that protect the environment, conserve resources and enhance the economic development of the communities where we operate. For more information about our Company, please visit our website at www.thecoca-colacompany.com.
Forward-Looking Statements
This press release may contain statements, estimates or projections that constitute "forward-looking statements" as defined under U.S. federal securities laws. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Coca-Cola Company's historical experience and our present expectations or projections. These risks include, but are not limited to, obesity and other health concerns; scarcity and quality of water; changes in the nonalcoholic beverages business environment, including changes in consumer preferences based on health and nutrition considerations and obesity concerns; shifting consumer tastes and needs, changes in lifestyles and increased consumer information; increased competition; our ability to expand our operations in emerging markets; foreign currency and interest rate fluctuations; our ability to maintain good relationships with our bottling partners; the financial condition of our bottling partners; our ability and the ability of our bottling partners to maintain good labor relations, including the ability to renew collective bargaining agreements on satisfactory terms and avoid strikes or work stoppages; increase in the cost of energy; increase in cost, disruption of supply or shortage of raw and packaging materials; changes in laws and regulations relating to beverage containers and packaging, including mandatory deposit, recycling, eco-tax and/or product stewardship laws or regulations; adoption of significant additional labeling or warning requirements; unfavorable general economic conditions in the United States; unfavorable economic and political conditions in international markets, including civil unrest and product boycotts; changes in commercial or market practices and business model within the European Union; litigation uncertainties; adverse weather conditions; our ability to maintain brand image and product quality as well as other product issues such as product recalls; changes in legal and regulatory environments; changes in accounting standards and taxation requirements; our ability to achieve overall long-term goals; our ability to protect our information systems; additional impairment charges; our ability to successfully manage Company-owned bottling operations; global or regional catastrophic events; and other risks discussed in our Company's filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.
Source: The Coca-Cola Company
Released October 15, 2008