The Coca-Cola Company Reports Second Quarter and Half Year 2007 Results
-- Second quarter reported EPS increased 3 percent to $0.80; up 15 percent to $0.85, after considering items impacting comparability.
-- Second quarter net revenue growth of 19 percent on worldwide unit case volume growth of 6 percent.
-- International unit case volume up 9 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 12 percent.
ATLANTA--(BUSINESS WIRE)--
The Coca-Cola Company today reported second quarter earnings per share of $0.80, which included a net charge of $0.05 per share primarily related to restructuring charges and a non-cash impairment charge at an equity investee. Earnings per share for the quarter increased 3 percent on a reported basis and 15 percent after considering items impacting comparability in both the current and prior year quarters. Earnings per share for the second quarter of 2006 were $0.78 and included a net benefit of $0.04 per share, primarily related to the gain on sale of shares in the initial public offering of the Turkish bottler.
"We delivered another strong quarter," said Neville Isdell, chairman and chief executive officer, The Coca-Cola Company. "While very pleased with this performance, we must underscore that we continue to manage for the long term. An overall favorable global environment has assisted our concerted and successful actions in the market place.
"This is our second consecutive quarter of 6 percent unit case volume growth and double-digit comparable earnings growth. We continue to demonstrate the growth potential of sparkling beverages, which delivered 4 percent growth in the quarter, while also driving 12 percent growth across our ever-expanding still portfolio. As we enter the second half of the year, we remain focused on leveraging our leading brands, building our innovation pipeline and driving productivity - the platform for delivering long-term sustainable growth."
"The second quarter was a significant one for The Coca-Cola Company," said Muhtar Kent, president and chief operating officer, The Coca-Cola Company. "Not only did we deliver strong, broad-based growth, but we also successfully completed the acquisition of glaceau, demonstrating our commitment to restoring growth in our flagship market of North America. Our results continue to be led by our international operations, which once again delivered 9 percent unit case volume growth. Performance in important markets, such as Japan, Germany, India and the Philippines, is showing signs that the actions we've taken are working. Much work remains to be done as our business and industry evolves, but each quarter - including now in North America - we are making steady progress. I am confident that with our focused and effective strategic agenda supported by a renewed confidence within our organization, we will continue to deliver growth and value to our shareowners over the long term."
(All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.)
Financial Highlights
-- Second quarter net operating revenues increased 19 percent.
Revenue growth reflected a 7 percent increase in concentrate
sales, a 7 percent increase from structural changes resulting
from acquisitions of certain bottlers, a 2 percent benefit
from pricing and mix and a 3 percent positive currency impact.
-- Operating income in the quarter increased 11 percent on a
reported basis and 12 percent after considering items
impacting comparability in both the current and prior year
periods. Items impacting comparability negatively affected
second quarter pre-tax operating income by $48 million in 2007
and by $31 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 and 2008 to 22.5 percent from 23.0
percent, providing a $0.01 per share benefit in the quarter.
-- Year-to-date, the Company repurchased $1.0 billion of its
stock and intends to repurchase a total of $1.75 to $2.0
billion of its stock for the full year.
-- Cash from operations was $3.3 billion year-to-date, compared
with $2.8 billion in the prior year period, an increase of 19
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 second quarter and
6 percent year-to-date. For the second consecutive quarter,
nearly all of the Company's top 22 markets delivered solid
growth.
-- International operations delivered 9 percent unit case volume
growth in the quarter, reflecting broad-based growth across
essentially all key geographies. Latin America continued to
generate strong growth across the region. Key emerging
markets, including China, Turkey, India, Brazil, South Africa,
Eastern Europe and Southern Eurasia all increased at
double-digit rates. Importantly, the Philippines achieved
double-digit unit case volume growth as actions began to take
hold. Unit case volume growth of 4 percent in Japan reflected
continued improvement. The European Union and Africa Groups
produced solid unit case volume growth of 5 percent and 8
percent, respectively. Acquisitions contributed approximately
1 percentage point of international volume growth in the
quarter.
-- 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 3, 6 and 8 percent,
respectively, in the quarter.
-- Still beverage unit case volume increased 12 percent in the
quarter, continuing its strong performance. Unit case volume
in the quarter for Trademark Dasani increased by mid-single
digits, and Trademark Powerade increased by double-digits,
both cycling double-digit growth in the prior year quarter.
Additionally, Trademark Minute Maid achieved mid-single digit
growth in the quarter.
-- Globally, the Company maintained or gained value share in key
beverage categories, including sparkling beverages,
juice/juice drinks, sports drinks, water, ready-to-drink teas
and energy drinks.
Africa
------
Percent Change
From Prior Year
--------------------------------
Second Year-
Quarter To-Date
---------------- ---------------
Unit Case Volume 8% 13%
Net Revenues 20% 16%
Operating Income (9%) 1%
-- The Africa Group unit case volume increased 8 percent in the
quarter, reflecting continued balanced growth across the
Group. This performance was led by 12 percent growth in South
Africa and solid performance in East & Central Africa and
North & West Africa. Net revenues for the quarter increased 20
percent, reflecting a 15 percent increase in concentrate
sales, positive pricing and mix, partially offset by an
unfavorable double-digit currency impact. The operating income
decline in the quarter of 9 percent reflected the increase in
net revenues, offset by restructuring charges and the
continued investment in key marketing initiatives including
the launch of the Coke Side of Life marketing campaign
throughout most of the Group.
Eurasia
-------
Percent Change
From Prior Year
--------------------------------
Second Year-
Quarter To-Date
---------------- ---------------
Unit Case Volume 15% 16%
Net Revenues 17% 20%
Operating Income 29% 31%
-- The Eurasia Group's unit case volume increased 15 percent in
the quarter, cycling 11 percent growth in the prior year
quarter. Double-digit unit case volume growth across most of
the Group, including India, Turkey, Eastern Europe and
Southern Eurasia, drove the results. Net revenues for the
quarter increased 17 percent, benefiting from an 11 percent
increase in concentrate sales, positive pricing, mix and
currency impacts. Operating income growth in the quarter of 29
percent reflected the benefit of the net revenue increase and
the continued investment in key business initiatives.
-- In India, unit case volume increased 12 percent in the
quarter, cycling a decline of 12 percent in the prior year
quarter. Continued investment in building organizational
capabilities 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
--------------------------------
Second Year-
Quarter To-Date
---------------- ---------------
Unit Case Volume 5% 7%
Net Revenues 15% 19%
Operating Income 21% 25%
-- Unit case volume in the European Union Group increased 5
percent in the quarter, driven by solid results in France,
Germany and Central and Southern Europe. The acquisitions in
2006 of the Apollinaris and Fonti Del Vulture brands, in
Germany and Italy respectively, contributed 3 percentage
points of unit case volume growth in the quarter. In the
quarter, net revenues increased 15 percent, reflecting a 4
percent increase in concentrate sales, positive price and mix,
and a high single-digit benefit from currency. Operating
income in the quarter increased 21 percent, primarily
reflecting the net revenue increase and the continued
investment in key marketing initiatives, including leveraging
the Coke Side of Life, Music and iTunes marketing campaigns
across the Group, as well as the continued success of
Coca-Cola Zero.
-- Unit case volume in Northwest Europe for the quarter increased
by low single-digits, the sixth consecutive quarter of growth.
Trademark Coca-Cola delivered low single-digit unit case
volume growth, which benefited from the launch of Coca-Cola
Zero in France, the Netherlands and Ireland. High single-digit
growth in still beverages also contributed to the results.
-- Unit case volume in Germany increased 7 percent. The results
were driven by improved marketplace execution, solid growth in
sparkling beverages, particularly diets and lights which grew
unit case volume double-digits on the continued success of
Coca-Cola Zero, the expansion of the 'Zero' concept to
Trademarks Fanta and Sprite, and increased availability in the
discounter channel. The acquisition of Apollinaris, a premium
source water brand, contributed 6 percentage points to unit
case volume growth in the quarter. The quarter included the
launch of Vio, a premium still water beverage under the
Apollinaris umbrella.
Latin America
-------------
Percent Change
From Prior Year
--------------------------------
Second Year-
Quarter To-Date
---------------- ---------------
Unit Case Volume 9% 8%
Net Revenues 25% 22%
Operating Income 19% 19%
-- 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. Solid growth across all key markets
and a 6 percent growth in Trademark Coca-Cola drove the
results. In the quarter, net revenues increased 25 percent,
reflecting a 9 percent increase in concentrate sales, positive
pricing and mix benefits, and a mid-single digit currency
benefit. Operating income in the quarter increased 19 percent,
reflecting the net revenue increase and the continued
investment in key marketing initiatives, including the launch
of Coca-Cola Zero in the new on-the-go 'Contour Grip' bottle
in seven markets year-to-date, which accelerated profitable
single-serve growth.
-- In Mexico, unit case volume increased 4 percent in the
quarter, cycling 5 percent growth in the prior year quarter
and driving share gains. The growth was led by Trademark
Coca-Cola, which increased 3 percent for the quarter including
the continued success of Coca-Cola Zero.
-- In Brazil, unit case volume growth for the quarter was 22
percent, cycling 7 percent growth in the prior year. The
acquisition of Matte Leao contributed to unit case volume
growth in the quarter. For the full year 2006, Matte Leao unit
case volume was 81 million. Strong unit case volume growth in
sparkling and still beverages drove the results and led to
continued share gains.
-- In Argentina, solid growth in Trademark Coca-Cola, including
the benefits of the successful launch of Coca-Cola Zero,
contributed to unit case volume growth of 7 percent in the
quarter, cycling 14 percent growth in the prior year quarter.
North America
-------------
Percent Change
From Prior Year
--------------------------------
Second Year-
Quarter To-Date
---------------- ---------------
Unit Case Volume (2%) (2%)
Net Revenues 9% 6%
Operating Income 1% (4%)
-- Unit case volume in the North America Group declined 2 percent
in the quarter. Net revenues for the quarter increased 9
percent, reflecting a 1 percent decrease in concentrate sales
offset by 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 1
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.
-- Retail unit case volume decreased 3 percent in the quarter.
Results in the quarter reflected the expected difficult
sparkling beverage industry environment and the 33 percent
decline in warehouse-delivered water as the system refocuses
resources behind the more profitable Dasani business. The
decline in warehouse-delivered water reduced the Group's and
Retail's unit case volume growth rates by 1 and 2 percent,
respectively.
-- Foodservice and Hospitality unit case volume was even in the
quarter, cycling 1 percent growth in the prior year quarter.
-- Sparkling beverage unit case volume declined 3 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 achieved 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. Also,
Diet Coke and Coca-Cola Classic each gained category share in
the quarter. Energy drinks continued to deliver strong
double-digit growth in the quarter.
-- In still beverages, Powerade continued to perform well,
delivering 9 percent unit case volume growth in the quarter,
cycling double-digit growth in the prior year quarter. Dasani
unit case volume increased 3 percent in the quarter, cycling
28 percent growth in the prior year quarter. Unit case growth
in teas accelerated in the quarter, increasing over 20 percent
and gaining category share. 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.
-- On June 7, 2007, the Company acquired Energy Brands Inc., also
known as glaceau, the maker of vitaminwater, the leading
active lifestyle beverage, for $4.1 billion. Full year 2006
volume for glaceau was 56 million unit cases.
Pacific
-------
Percent Change
From Prior Year
--------------------------------
Second Year-
Quarter To-Date
---------------- ---------------
Unit Case Volume 9% 7%
Net Revenues 8% 7%
Operating Income 3% 3%
-- The Pacific Group increased unit case volume by 9 percent for
the quarter, cycling a 2 percent decline in the prior year
quarter. Net revenues for the quarter increased 8 percent,
reflecting a 14 percent increase in concentrate sales,
partially offset by country mix and a slight negative currency
impact. Operating income increased 3 percent for the quarter,
driven by the increase in net revenues and the continued
investment in key marketing initiatives.
-- In Japan, unit case volume increased 4 percent in the quarter,
the fourth consecutive quarter of improved results. Growth was
led by a low double-digit increase in Trademark Coca-Cola,
reflecting the success of the Coke Side of Life marketing
campaign and the new three cola strategy. Georgia Coffee
continued to gain category share with the renewed focus on
core flavors. Additionally, the Company announced during the
quarter it had reached an agreement to acquire a 34 percent
stake in Tokyo Coca-Cola Bottling Company. The transaction
closed July 3, 2007.
-- In China, second quarter unit case volume grew 18 percent led
by double-digit growth in sparkling beverages reflecting
strong growth in the recently introduced 'Contour Grip' single
serve package and a successful integrated music campaign on
Sprite. Still beverage unit case volume increased
double-digits in the quarter reflecting strong growth in
Minute Maid and Nestea. The strong performance across the
portfolio resulted in share gains in both sparkling and still
beverages.
-- In the Philippines, unit case volume increased by 11 percent
in the quarter, cycling a 19 percent decline in the prior year
quarter. The Company acquired the Philippines bottler on
February 22, 2007. Results in the quarter reflect early signs
that the initiatives to improve business performance are
starting to gain traction.
Bottling Investments
--------------------
Percent Change
From Prior Year
--------------------------------
Second Year-
Quarter To-Date
---------------- ---------------
Unit Case Volume 75% 65%
Net Revenues 55% 52%
Operating Income (14%) 143%
-- The Bottling Investments Group's unit case volume increased 75
percent in the quarter, reflecting unit case volume growth
across the Group as well as a benefit from the acquisitions of
certain bottlers. Net revenues increased 55 percent for the
quarter due to the unit case volume increase, the acquisition
of certain bottlers, favorable pricing and mix, and positive
currency benefits. The operating income decline in the quarter
reflects the focus on driving sustained financial performance
through revenue increases offset by the impact of
restructuring charges.
Financial Review
Operating Results
Net operating revenues for the quarter increased 19 percent, reflecting a 7 percent increase in concentrate sales, a 7 percent increase from structural changes resulting from acquisitions of certain bottlers, a 2 percent benefit from pricing and mix and a 3 percent positive currency impact.
Cost of goods sold increased 30 percent for the quarter, reflecting a 7 percent increase in concentrate sales, a 16 percent increase from structural changes resulting from acquisitions of certain bottlers and items impacting comparability, a 3 percent increase from currency and increases in commodity-based input and freight costs.
Selling, general and administrative expenses for the quarter increased 17 percent, reflecting a 6 percent increase from structural changes resulting from acquisitions of certain bottlers, a 3 percent increase from currency, increased costs in the consolidated bottling operations to drive growth and continued investments in marketing.
Operating income for the quarter increased 11 percent, reflecting the growth in gross profit, the investments in marketing and increased sales and service expenses. After considering items impacting comparability, operating income increased 12 percent. 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 low single-digit favorable impact on operating income for the year.
Equity income declined in the quarter primarily reflecting the non-cash impairment charge at Coca-Cola Amatil Limited, the restructuring charges at certain equity investees and the reduction in previous quarters of the Company's ownership positions in Coca-Cola FEMSA S.A.B. de C.V., Coca-Cola Icecek A.S. and Vonpar Refrescos S.A.
During the second quarter, the Company purchased Energy Brands Inc., known as glaceau, for $4.1 billion. The transaction is expected to be $0.01 to $0.02 dilutive to earnings per share in 2007 and slightly accretive to Company earnings per share in 2008. Approximately 71 percent of the purchase price was paid at the closing during the current quarter, and the remaining 29 percent will be paid in the fourth quarter of 2007. Short-term debt balances increased during the quarter primarily due to financing of this acquisition.
In the first quarter of 2007, the Company completed the purchase of the 65 percent ownership interest of the Philippines bottler previously owned by San Miguel Corporation. The Company continues to expect that the consolidation of the Philippines bottler and the implementation of programs to return the business to sustainable growth will negatively impact 2007 earnings per share by approximately $0.02 and have no impact in 2008.
Effective Tax Rate
The reported effective tax rate for the quarter was 23.1 percent. The rate was increased by the impact of an increase in tax reserves related to certain tax matters and reduced by the impact of the restructuring charges and write-offs at equity investees recorded at a rate higher than the underlying effective tax rate and as a result of reducing the estimated full year underlying effective tax rate. The Company is required to record income tax expense for the first six months of the year based on the estimated effective tax rate for the year. As discussed in the first quarter earnings release, the Company had previously estimated that its underlying effective tax rate on operations would be approximately 23 percent for the full year. The Company now anticipates that its underlying effective tax rate on operations for the full year 2007 and 2008 will be approximately 22.5 percent. To bring the effective tax rate for the first six 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 22.2 percent in the second quarter. 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 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 S.A. 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 second 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
-------------------------------------
June 29, 2007 June 30, 2006 % Change
------------- ------------- ---------
Net Operating Revenues $ 7,733 $ 6,476 19
Cost of goods sold 2,736 2,110 30
------------- -------------
Gross Profit 4,997 4,366 14
Selling, general and
administrative expenses 2,685 2,296 17
Other operating charges 42 31 --
------------- -------------
Operating Income 2,270 2,039 11
Interest income 54 47 15
Interest expense 102 63 62
Equity income - net 190 252 (25)
Other income (loss) - net (4) 116 --
------------- -------------
Income Before Income Taxes 2,408 2,391 1
Income taxes 557 555 0
------------- -------------
Net Income $ 1,851 $ 1,836 1
============= =============
Diluted Net Income Per Share(a) $ 0.80 $ 0.78 3
============= =============
Average Shares Outstanding -
Diluted(a) 2,326 2,352
============= =============
(a) For the second quarter, "Basic Net Income Per Share" was $0.80
for 2007 and $0.78 for 2006 based on "Average Shares Outstanding -
Basic" of 2,312 and 2,350 for 2007 and 2006, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(In millions except per share data)
----------------------------------------------------------------------
Six Months Ended
-------------------------------------
June 29, 2007 June 30, 2006 % Change
------------- ------------- ---------
Net Operating Revenues $ 13,836 $ 11,702 18
Cost of goods sold 4,881 3,836 27
------------- -------------
Gross Profit 8,955 7,866 14
Selling, general and
administrative expenses 5,010 4,356 15
Other operating charges 48 76 --
------------- -------------
Operating Income 3,897 3,434 13
Interest income 91 117 (22)
Interest expense 173 126 37
Equity income - net 210 338 (38)
Other income - net 112 103 --
------------- -------------
Income Before Income Taxes 4,137 3,866 7
Income taxes 1,024 924 11
------------- -------------
Net Income $ 3,113 $ 2,942 6
============= =============
Diluted Net Income Per Share(a) $ 1.34 $ 1.25 7
============= =============
Average Shares Outstanding -
Diluted(a) 2,324 2,359
============= =============
(a) For the six months, "Basic Net Income Per Share" was $1.35 for
2007 and $1.25 for 2006 based on "Average Shares Outstanding - Basic"
of 2,313 and 2,358 for 2007 and 2006, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(UNAUDITED)
(In millions except par value)
----------------------------------------------------------------------
June 29, 2007 December 31, 2006
-------------- -----------------
Assets
----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 4,364 $ 2,440
Marketable securities 177 150
Trade accounts receivable, less
allowances of $120 and $63,
respectively 3,315 2,587
Inventories 2,086 1,641
Prepaid expenses and other assets 1,970 1,623
--------- ----------
Total Current Assets 11,912 8,441
--------- ----------
Investments
Equity method investments 6,292 6,310
Cost method investments,
principally bottling companies 540 473
--------- ----------
Total Investments 6,832 6,783
--------- ----------
Other Assets 2,656 2,701
Property, Plant and Equipment - net 7,579 6,903
Trademarks With Indefinite Lives 5,217 2,045
Goodwill 3,727 1,403
Other Intangible Assets 2,066 1,687
--------- ----------
Total Assets $ 39,989 $ 29,963
========= ==========
Liabilities and Shareowners' Equity
----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 6,631 $ 5,055
Loans and notes payable 8,039 3,235
Current maturities of long-term debt 49 33
Accrued income taxes 529 567
--------- ----------
Total Current Liabilities 15,248 8,890
--------- ----------
Long-Term Debt 1,599 1,314
Other Liabilities 2,863 2,231
Deferred Income Taxes 1,307 608
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 6,651 5,983
Reinvested earnings 34,941 33,468
Accumulated other comprehensive
income (loss) (473) (1,291)
Treasury stock, at cost - 1,208
shares and 1,193 shares,
respectively (23,027) (22,118)
--------- ----------
Total Shareowners' Equity 18,972 16,920
--------- ----------
Total Liabilities and Shareowners'
Equity $ 39,989 $ 29,963
========= ==========
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
(In millions)
----------------------------------------------------------------------
Six Months Ended
----------------------------
June 29, 2007 June 30, 2006
------------- -------------
Operating Activities
Net income $ 3,113 $ 2,942
Depreciation and amortization 515 433
Stock-based compensation expense 155 158
Deferred income taxes (44) 11
Equity income or loss, net of dividends (82) (206)
Foreign currency adjustments (25) 18
Gains on sales of assets, including
bottling interests (139) (124)
Other operating charges 48 76
Other items 49 100
Net change in operating assets and
liabilities (295) (646)
------------- -------------
Net cash provided by operating
activities 3,295 2,762
------------- -------------
Investing Activities
Acquisitions and investments,
principally trademarks and bottling
companies (3,649) (285)
Purchases of other investments (41) (38)
Proceeds from disposals of other
investments 258 208
Purchases of property, plant and
equipment (770) (626)
Proceeds from disposals of property,
plant and equipment 151 51
Other investing activities 5 (7)
------------- -------------
Net cash used in investing activities (4,046) (697)
------------- -------------
Financing Activities
Issuances of debt 5,762 237
Payments of debt (2,080) (1,143)
Issuances of stock 643 1
Purchases of stock for treasury (958) (1,165)
Dividends (787) (754)
------------- -------------
Net cash provided by (used in)
financing activities 2,580 (2,824)
------------- -------------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 95 62
------------- -------------
Cash and Cash Equivalents
Net increase (decrease) during the
period 1,924 (697)
Balance at beginning of period 2,440 4,701
------------- -------------
Balance at end of period $ 4,364 $ 4,004
============= =============
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Three Months Ended
----------------------------------------------------------------------
Net Operating Revenues Operating Income (Loss)
----------------------------------------------------------------------
June 29,June 30, June 29,June 30,% Fav.
2007 2006 % Fav. / 2007 2006 /
(1) (4) (Unfav.) (2) (5) (Unfav.)
----------------------------------------------------------------------
Africa $ 300 $ 251 20 $ 79 $ 87 (9)
Eurasia 352 301 17 162 126 29
European Union 1,449 1,261 15 829 687 21
Latin America 779 622 25 413 346 19
North America 2,083 1,909 9 500 493 1
Pacific 1,170 1,079 8 506 492 3
Bottling
Investments 2,118 1,369 55 75 87 (14)
Corporate 18 22 (18) (294) (279) (5)
Eliminations (536) (338) - - - -
----------------------------------------------------
Consolidated $7,733 $6,476 19 $2,270 $2,039 11
----------------------------------------------------------------------
Income (Loss) Before Income Taxes
----------------------------------------------------------------------
June 30,
June 29, 2007 2006 % Fav. /
(2), (3) (5), (6) (Unfav.)
----------------------------------------------------------------------
Africa $ 78 $ 84 (7)
Eurasia 168 133 26
European Union 830 689 20
Latin America 413 346 19
North America 496 492 1
Pacific 500 490 2
Bottling Investments 247 330 (25)
Corporate (324) (173) (87)
Eliminations - - -
--------------------------------------
Consolidated $ 2,408 $2,391 1
----------------------------------------------------------------------
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 second quarter of 2007 were $12
million for Africa, $43 million for Eurasia, $258 million for
European Union, $22 million for Latin America, $21 million for North
America, $135 million for Pacific and $45 million for Bottling
Investments.
(2) Operating income (loss) and income (loss) before income taxes for
the second quarter of 2007 were reduced by $18 million for Africa, $5
million for European Union, $2 million for Latin America, $1 million
for Pacific and $23 million for Bottling Investments primarily due to
asset write-downs and restructuring costs and were increased by $1
million for Corporate.
(3) Income (loss) before income taxes for the second quarter of 2007
was reduced by $89 million for Bottling Investments primarily due to
our proportionate share of asset write-downs and restructuring costs
recorded by equity investees.
(4) Intersegment revenues for the second quarter of 2006 were $8
million for Africa, $31 million for Eurasia, $229 million for
European Union, $29 million for Latin America, $14 million for
Pacific and $27 million for Bottling Investments.
(5) Operating income (loss) and Income (loss) before income taxes for
the second quarter of 2006 were reduced by $27 million for European
Union, $2 million for Pacific and $2 million for Bottling Investments
primarily related to costs associated with production capacity
efficiencies and other restructuring costs.
(6) Income (loss) before income taxes for the second quarter of 2006
was increased by $21 million for Bottling Investments due to our
proportionate share of certain items recorded by equity investees and
$123 million for Corporate related to the sale of a portion of the
investment in Coca-Cola Icecek in an initial public offering.
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(UNAUDITED)
(In millions)
Six Months Ended
----------------------------------------------------------------------
Net Operating Revenues Operating Income (Loss)
----------------------------------------------------------------------
June 29, June 30, % Fav. June 29,June 30,
2007 2006 / 2007 2006 % Fav. /
(1) (4) (Unfav.) (2) (5) (Unfav.)
----------------------------------------------------------------------
Africa $ 610 $ 527 16 $ 191 $ 190 1
Eurasia 571 477 20 249 190 31
European Union 2,539 2,134 19 1,433 1,142 25
Latin America 1,498 1,225 22 828 695 19
North America 3,764 3,554 6 847 881 (4)
Pacific 2,109 1,965 7 878 855 3
Bottling
Investments 3,612 2,383 52 73 30 143
Corporate 32 42 (24) (602) (549) (10)
Eliminations (899) (605) - - - -
----------------------------------------------------
Consolidated $13,836 $11,702 18 $3,897 $3,434 13
----------------------------------------------------------------------
Income (Loss) Before Income Taxes
----------------------------------------------------------------------
June 29, 2007 June 30, 2006 % Fav. /
(2), (3) (5), (6) (Unfav.)
----------------------------------------------------------------------
Africa $ 186 $ 185 1
Eurasia 257 205 25
European Union 1,435 1,146 25
Latin America 828 695 19
North America 842 880 (4)
Pacific 868 855 2
Bottling Investments 254 348 (27)
Corporate (533) (448) (19)
Eliminations - - -
--------------------------------------------
Consolidated $ 4,137 $ 3,866 7
----------------------------------------------------------------------
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 first six months of 2007 were $22
million for Africa, $67 million for Eurasia, $463 million for
European Union, $60 million for Latin America, $37 million for North
America, $185 million for Pacific and $65 million for Bottling
Investments.
(2) Operating income (loss) and income (loss) before income taxes for
the first six months of 2007 were reduced by $20 million for Africa,
$5 million for European Union, $2 million for Latin America, $1
million for Pacific, $29 million for Bottling Investments and $1
million for Corporate primarily due to asset write-downs and
restructuring costs.
(3) Income (loss) before income taxes for the first six months of 2007
was reduced by $162 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 $136 million for
Corporate primarily due to gains on the sale of real estate in Spain
and the sale of the ownership in Vonpar, a bottler in Brazil.
(4) Intersegment revenues for the first six months of 2006 were $15
million for Africa, $49 million for Eurasia, $411 million for
European Union, $60 million for Latin America, $31 million for
Pacific and $39 million for Bottling Investments.
(5) Operating income (loss) and income (loss) before income taxes for
the first six months of 2006 were reduced by $27 million for European
Union, $5 million for Pacific and $44 million for Bottling
Investments primarily related to costs associated with production
capacity efficiencies and other restructuring costs.
(6) Income (loss) before income taxes for the first six months of 2006
was increased by $12 million for Bottling Investments due to our
proportionate share of certain items impacting equity investees and
$123 million for Corporate related to the sale of a portion of the
investment in Coca-Cola Icecek in an initial public offering.
THE COCA-COLA COMPANY AND SUBSIDIARIES
----------------------------------------------------------------------
Reconciliation of GAAP to Non-GAAP Financial Measures
----------------------------------------------------------------------
(UNAUDITED)
(In millions except per share data)
-----------------------------------------------
Three Months Ended June 29, 2007
----------------------------------------------------
Items Impacting Comparability
---------------------------------------
Gains
on Certain
Asset Sales Tax
Reported Impairments/ Equity of Matters
(GAAP) Restructuring Investees Assets (1)
-----------------------------------------------
Net Operating
Revenues $7,733
Cost of goods sold 2,736 ($6)
-----------------------------------------------
Gross Profit 4,997 6
Selling, general
and
administrative
expenses 2,685
Other operating
charges 42 (42)
-----------------------------------------------
Operating Income
(3) 2,270 48
Interest income 54
Interest expense 102
Equity income -
net 190 $ 89
Other income
(loss) - net (4) $ 1
-----------------------------------------------
Income Before
Income Taxes 2,408 48 89 1
Income taxes 557 12 26 - ($30)
-----------------------------------------------
Net Income $1,851 $ 36 $ 63 $ 1 $ 30
===============================================
Diluted Net Income
Per Share $ 0.80 $ 0.02 $ 0.03 $ 0.00 $ 0.01
===============================================
Average Shares
Outstanding -
Diluted 2,326 2,326 2,326 2,326 2,326
===============================================
Gross Margin 64.6%
Operating Margin 29.4%
Effective Tax Rate 23.1%
-----------------------------------------------
-------------- --------- ------------
Three Months
Ended June
29, 2007
--------------
% Change -
After % Change After
Considering - Considering
Items Reported Items
(Non-GAAP) (GAAP) (Non-GAAP)
-------------- --------- ------------
Net Operating Revenues $7,733 19(2) 19
Cost of goods sold 2,730 30 29
--------------
Gross Profit 5,003 14 15
Selling, general and
administrative expenses 2,685 17 17
Other operating charges - -- --
--------------
Operating Income (3) 2,318 11 12
Interest income 54 15 15
Interest expense 102 62 62
Equity income - net 279 (25) 21
Other income (loss) - net (3) -- --
--------------
Income Before Income Taxes 2,546 1 12
Income taxes 565 0 3
--------------
Net Income $1,981 1 14
==============
Diluted Net Income Per Share $ 0.85 (4) 3 15
==============
Average Shares Outstanding -
Diluted 2,326
==============
Gross Margin 64.7%
Operating Margin 30.0%
Effective Tax Rate 22.2%
-------------- --------- ------------
-------------------------------
Three Months Ended June 30, 2006
----------------------------------------
Items Impacting Comparability
-------------------------------
Asset
Reported Impairments/ Equity
(GAAP) Restructuring Investee
-------------------------------
Net Operating Revenues $6,476
Cost of goods sold 2,110
-------------------------------
Gross Profit 4,366
Selling, general and
administrative expenses 2,296
Other operating charges 31 ($31)
-------------------------------
Operating Income 2,039 31
Interest income 47
Interest expense 63
Equity income - net 252 ($21)
Other income (loss) - net 116
-------------------------------
Income Before Income Taxes 2,391 31 (21)
Income taxes 555 1 (2)
-------------------------------
Net Income $1,836 $ 30 ($19)
===============================
Diluted Net Income Per Share $ 0.78 $ 0.01 ($0.01)
===============================
Average Shares Outstanding -
Diluted 2,352 2,352 2,352
===============================
Gross Margin 67.4%
Operating Margin 31.5%
Effective Tax Rate 23.2%
-------------------------------
---------------------------------
Three Months Ended June 30, 2006
---------------------------------
Items Impacting
Comparability
--------------------
TransactionCertain After
Gains Tax Considering
Matters Items
(1) (Non-GAAP)
---------------------------------
Net Operating Revenues $6,476
Cost of goods sold 2,110
---------------------------------
Gross Profit 4,366
Selling, general and
administrative expenses 2,296
Other operating charges -
---------------------------------
Operating Income 2,070
Interest income 47
Interest expense 63
Equity income - net 231
Other income (loss) - net ($123) (7)
---------------------------------
Income Before Income Taxes (123) 2,278
Income taxes 14 ($22) 546
---------------------------------
Net Income ($137) $ 22 $1,732
=================================
Diluted Net Income Per Share ($0.06) $ 0.01 $ 0.74 (4)
=================================
Average Shares Outstanding -
Diluted 2,352 2,352 2,352
=================================
Gross Margin 67.4%
Operating Margin 32.0%
Effective Tax Rate 24.0%
---------------------------------
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:
2007 2006 % Change
----------------------------
Reported net operating
revenues $7,733 $6,476 19%
Structural changes (474) -- --
----------------------------
Net operating revenues
excluding structural
changes $7,259 $6,476 12%
============================
(3) Operating income for the three months ended June 29, 2007
includes a positive currency impact of approximately 3%.
Ongoing, currency neutral operating income growth is 9%.
(4) Per share amounts do not add due to rounding.
The Company reports its financial results in accordance with U. S.
generally accepted accounting principles (GAAP). However,
management believes that certain non-GAAP financial measures used
in managing the business may provide users of this financial
information additional meaningful comparisons between current
results and results in prior operating periods. Management
believes that these non-GAAP financial measures can provide
additional meaningful reflection of underlying trends of the
business because they provide a comparison of historical
information that excludes certain items that impact the overall
comparability. Management also uses these non-GAAP financial
measures in making financial, operating and planning decisions
and in evaluating the Company's performance. See the Table above
for supplemental financial data and corresponding reconciliations
to GAAP financial measures for the three months ended June 29,
2007 and June 30, 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)
----------------------------------------------------------
Six Months Ended June 29, 2007
----------------------------------------------------------
Items Impacting Comparability
--------------------------------------
Gains
on Certain After
Asset Sales Tax Considering
Reported Impairments/ Equity of Matters Items
(GAAP) Restructuring Investees Assets (1) (Non-GAAP)
----------------------------------------------------------
Net
Operating
Revenues $13,836 $13,836
Cost of
goods sold 4,881 ($10) 4,871
----------------------------------------------------------
Gross Profit 8,955 10 8,965
Selling,
general and
admini-
strative
expenses 5,010 5,010
Other
operating
charges 48 (48) -
----------------------------------------------------------
Operating
Income (2) 3,897 58 3,955
Interest
income 91 91
Interest
expense 173 173
Equity
income -
net 210 $ 162 372
Other income
(loss) -
net 112 ($136) (24)
----------------------------------------------------------
Income
Before
Income
Taxes 4,137 58 162 (136) 4,221
Income taxes 1,024 14 26 (73) ($41) 950
----------------------------------------------------------
Net Income $ 3,113 $ 44 $ 136 ($63)$ 41 $ 3,271
==========================================================
Diluted Net
Income Per
Share $ 1.34 $ 0.02 $ 0.06 ($0.03)$ 0.02 $ 1.41
==========================================================
Average
Shares
Outstanding
- Diluted 2,324 2,324 2,324 2,324 2,324 2,324
==========================================================
Gross Margin 64.7% 64.8%
Operating
Margin 28.2% 28.6%
Effective
Tax Rate 24.8% 22.5%
----------------------------------------------------------
---------------------------------
% Change - After
Considering
% Change - Items
Reported (GAAP) (Non-GAAP)
---------------------------------
Net Operating Revenues 18 18
Cost of goods sold 27 27
Gross Profit 14 14
Selling, general and admini-
strative expenses 15 15
Other operating charges -- --
Operating Income (2) 13 13
Interest income (22) (22)
Interest expense 37 37
Equity income - net (38) 14
Other income (loss) - net -- --
Income Before Income Taxes 7 11
Income taxes 11 4
Net Income 6 13
Diluted Net Income Per Share 7 15
Average Shares Outstanding - Diluted
Gross Margin
Operating Margin
Effective Tax Rate
---------------------------------
-------------------------------
Six Months Ended June 30, 2006
-----------------------------------------
Items Impacting Comparability
-------------------------------
Reported Asset Equity
(GAAP) Impairments/ Investee
Restructuring
-------------------------------
Net Operating Revenues $11,702
Cost of goods sold 3,836
-------------------------------
Gross Profit 7,866
Selling, general and
administrative expenses 4,356
Other operating charges 76 ($76)
-------------------------------
Operating Income 3,434 76
Interest income 117
Interest expense 126
Equity income - net 338 ($12)
Other income (loss) - net 103
-------------------------------
Income Before Income Taxes 3,866 76 (12)
Income taxes 924 8 (1)
-------------------------------
Net Income $ 2,942 $ 68 ($11)
===============================
Diluted Net Income Per Share $ 1.25 $ 0.03 $ 0.00
===============================
Average Shares Outstanding -
Diluted 2,359 2,359 2,359
===============================
Gross Margin 67.2%
Operating Margin 29.3%
Effective Tax Rate 23.9%
-------------------------------
--------------------------------
Six Months Ended June 30, 2006
--------------------------------
Items Impacting
Comparability
--------------------
Certain After
Tax Considering
Transaction Matters Items
Gains (1) (Non-GAAP)
--------------------------------
Net Operating Revenues $11,702
Cost of goods sold 3,836
--------------------------------
Gross Profit 7,866
Selling, general and administrative
expenses 4,356
Other operating charges -
--------------------------------
Operating Income 3,510
Interest income 117
Interest expense 126
Equity income - net 326
Other income (loss) - net ($123) (20)
--------------------------------
Income Before Income Taxes (123) 3,807
Income taxes 14 ($32) 913
--------------------------------
Net Income ($137) $ 32 $ 2,894
================================
Diluted Net Income Per Share ($0.06) $ 0.01 $ 1.23
================================
Average Shares Outstanding - Diluted 2,359 2,359 2,359
================================
Gross Margin 67.2%
Operating Margin 30.0%
Effective Tax Rate 24.0%
--------------------------------
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) Operating income for the six months ended June 29, 2007 includes a
positive currency impact of approximately 3%. Ongoing, currency
neutral operating income growth is 10%.
The Company reports its financial results in accordance with U. S.
generally accepted accounting principles (GAAP). However, management
believes that certain non-GAAP financial measures used in managing
the business may provide users of this financial information
additional meaningful comparisons between current results and results
in prior operating periods. Management believes that these non-GAAP
financial measures can provide additional meaningful reflection of
underlying trends of the business because they provide a comparison
of historical information that excludes certain items that impact the
overall comparability. Management also uses these non-GAAP financial
measures in making financial, operating and planning decisions and in
evaluating the Company's performance. See the Table above for
supplemental financial data and corresponding reconciliations to GAAP
financial measures for the six months ended June 29, 2007 and June
30, 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 July 17, 2007