THE COCA-COLA COMPANY REPORTS THIRD QUARTER 2015 RESULTS - PDF

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Contacts: Investors and Analysts: Tim Leveridge T Media: Petro Kacur T The Coca-Cola Company Global Public Affairs & Communications Department P.O. Box 1734 Atlanta, GA
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Contacts: Investors and Analysts: Tim Leveridge T Media: Petro Kacur T The Coca-Cola Company Global Public Affairs & Communications Department P.O. Box 1734 Atlanta, GA THE COCA-COLA COMPANY REPORTS THIRD QUARTER 2015 RESULTS Reported revenue declined 5% and organic revenue grew 3% Global price/mix of 3% reflecting positive pricing and packaging initiatives across key markets Reported EPS was $0.33 and comparable EPS was $0.51 Global volume grew 3% Year-to-date cash from operations increased 5% to $8.4 billion, despite significant foreign currency headwinds Expect full-year comparable currency neutral EPS growth of 5%, in line with the range laid out at the beginning of the year ATLANTA, Oct. 21, 2015 The Coca-Cola Company today reported third quarter 2015 operating results. Our third quarter results were in line with our expectations and reflect the continued execution of our strategic initiatives to restore momentum, which are beginning to take hold across our global business, said Muhtar Kent, Chairman and Chief Executive Officer of The Coca-Cola Company. By aggressively driving productivity and streamlining the business, we are funding investments to accelerate growth. We have aligned and incented the organization against a clear revenue segmentation strategy. Finally, we have announced significant steps that evolve and strengthen our unparalleled global distribution system, including the planned creation of Coca-Cola Beverages, Coca-Cola an Partners, and most recently in the United States, the National Product Supply System. Despite a continued challenging macro environment, all of us at The Coca-Cola Company remain confident in our strategies and committed to the creation of long-term shareowner value. THIRD QUARTER 2015 OPERATING REVIEW TOTAL COMPANY Third Quarter Percent Change Unit Case Volume 3 2 Sparkling Beverages 2 1 Still Beverages 6 4 Concentrate Sales/Reported Volume 0 3 Price/Mix 3 2 Currency (8) (7) Acquisitions & Divestitures 0 0 Reported Net Revenues (5) (2) Organic Revenues * 3 5 Reported Income Before Taxes (35) (2) Comparable CN Income Before Taxes (Structurally Adjusted) * 8 8 * Organic revenue and comparable currency neutral (CN) before taxes (structurally adjusted) are non-gaap financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule. YTD We had positive organic revenue growth in each of our operating groups except for in the quarter, and we gained global value share in nonalcoholic ready-to-drink (NARTD) beverages. Organic revenue growth was driven by 3 points of positive price/mix and reflects positive pricing and packaging initiatives across many key markets. Price/mix also benefited from geographic mix due to the strong performance of certain Companyowned bottling operations within our Investments group. After adjusting for the six additional days in the first quarter, concentrate sales growth trailed unit case volume growth year to date. We expect concentrate sales and unit case sales to be generally in line for the full year. We gained global value share in sparkling beverages in the quarter. Global sparkling beverage volume growth was led by 1% growth in Trademark Coca-Cola which included 1% growth in brand Coca-Cola and 8% growth in Coke Zero, partially offset by an 8% decline in Diet Coke. Low single-digit growth in Sprite and Fanta also contributed to global sparkling beverage volume growth in the quarter. We gained global value share in still beverages and gained value and volume share in the juice and juice drinks and ready-to-drink tea categories in the quarter. Global still beverage volume growth reflects 4% growth in ready-to-drink tea, 5% growth in sports drinks and 11% growth in packaged water. 2 Comparable currency neutral before taxes (structurally adjusted) outpaced organic revenue growth in the quarter primarily due to gross margin expansion and the impact of our ongoing productivity initiatives, partially offset by increased marketing investments, a decrease in interest and lower equity. The reported effective tax rate and the underlying annual effective tax rate in the quarter were 15.8% and 22.5%, respectively. The variance between the reported rate and the underlying rate was due to the tax effect of various items impacting comparability, separately disclosed in the Reconciliation of GAAP and Non-GAAP Financial Measures schedule. Reported EPS was $0.33 and comparable EPS was $0.51 in the quarter. Items impacting comparability decreased reported EPS by a $0.18 and were primarily related to noncash charges related to refranchising certain territories in and costs associated with our previously announced productivity program. Fluctuations in foreign currency exchange rates resulted in a 12 point headwind on comparable operating, before taxes and EPS in the quarter. Year-to-date cash from operations was $8.4 billion, up 5%. The increase was primarily due to efficient management of working capital and the impact of six additional days in the first quarter, partially offset by fluctuations in foreign currency exchange rates and the impact of refranchised territories in. Year-to-date share repurchases totaled $1.3 billion. 3 EURASIA AND AFRICA Third Quarter Percent Change Unit Case Volume 4 4 Sparkling Beverages 3 3 Still Beverages 6 5 Concentrate Sales 4 4 Price/Mix (2) 0 Currency (15) (12) Acquisitions & Divestitures (2) (1) Reported Net Revenues (15) (9) Organic Revenues * 2 4 Reported Income Before Taxes (22) (12) Comparable CN Income Before Taxes * (8) 2 * Organic revenue and comparable currency neutral (CN) before taxes are non-gaap financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule. YTD Organic revenue growth in the quarter was driven by concentrate sales growth, partially offset by unfavorable geographic mix. Acquisitions and divestitures reflect the unfavorable impact from the brand transfer agreement associated with the closing of the transaction with Monster Beverage Corporation. After adjusting for the additional selling days in the first quarter and unit case volume related to joint ventures that do not have equivalent concentrate sales, concentrate sales growth trailed unit case volume growth year to date primarily due to timing of shipments in the prior year. We expect concentrate sales and unit case sales to be generally in line for the full year. Comparable currency neutral before taxes trailed organic revenue growth in the quarter primarily due to lower equity associated with our joint ventures in the juice and juice drinks category in the region and a low single-digit unfavorable impact from the closing of the transaction with Monster Beverage Corporation. We gained value and volume share in total NARTD beverages, sparkling beverages and still beverages in the quarter. Sparkling beverage volume growth was driven by 4% growth in Trademark Coca-Cola and 7% growth in Sprite. Still beverage volume growth was primarily driven by 6% growth in juice and juice drinks and 8% growth in packaged water. Unit case volume growth was driven by 11% growth in our Central, East & West business unit and 7% growth in our Middle East & business unit. Growth in these markets was partially offset by a high single-digit decline in Russia. 4 EUROPE Third Quarter Percent Change Unit Case Volume 4 1 Sparkling Beverages 2 0 Still Beverages 12 8 Concentrate Sales 2 3 Price/Mix 0 0 Currency (8) (10) Acquisitions & Divestitures (1) 0 Reported Net Revenues (7) (7) Organic Revenues * 3 3 Reported Income Before Taxes (4) (4) Comparable CN Income Before Taxes * (2) 0 * Organic revenue and comparable currency neutral (CN) before taxes are non-gaap financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule. YTD Organic revenue growth in the quarter was driven by concentrate sales growth, including strong growth in our expanding still beverage portfolio. Positive price/mix across certain key markets was offset by unfavorable geographic mix primarily due to strong concentrate sales growth in our Central and Southern business unit. Acquisitions and divestitures reflect the unfavorable impact from the brand transfer agreement associated with the closing of the transaction with Monster Beverage Corporation. After adjusting for the additional selling days in the first quarter, concentrate sales growth and unit case volume growth were generally in line year to date. Comparable currency neutral before taxes trailed organic revenue growth in the quarter primarily due to increased marketing investments and a low single-digit unfavorable impact from the closing of the transaction with Monster Beverage Corporation, partially offset by the impact of ongoing productivity initiatives. Sparkling beverage volume growth was driven by 9% growth in Coke Zero and 6% growth in Fanta, partially offset by a 6% decline in Diet Coke/Coke Light. Still beverage volume growth was driven by the continued expansion of our still beverage portfolio and included doubledigit growth in packaged water, sports drinks and the innocent brand. We gained value and volume share in still beverages and the packaged water category. We also gained value share in the sports drinks and juice and juice drinks categories. 5 LATIN AMERICA Third Quarter Percent Change Unit Case Volume 2 1 Sparkling Beverages 1 0 Still Beverages 6 4 Concentrate Sales 1 3 Price/Mix 13 9 Currency (28) (22) Acquisitions & Divestitures 0 0 Reported Net Revenues (14) (10) Organic Revenues * Reported Income Before Taxes (18) (16) Comparable CN Income Before Taxes * * Organic revenue and comparable currency neutral (CN) before taxes are non-gaap financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule. YTD Organic revenue growth in the quarter reflects positive price/mix in each of our four business units, particularly in the higher inflationary markets within our South business unit. After adjusting for the additional selling days in the first quarter, concentrate sales growth and unit case volume growth were generally in line year to date. Comparable currency neutral before taxes modestly outpaced organic revenue growth in the quarter as positive operating leverage driven by organic revenue growth was mostly offset by increased marketing investments. We gained value and volume share in sparkling beverages and still beverages (excluding packaged water) in the quarter. Still beverage volume growth included 8% growth in juice and juice drinks and double-digit growth in sports drinks. Unit case volume growth was driven by 4% growth in both Mexico and our Center business unit and 3% growth in our South business unit. Growth in these markets was partially offset by a 4% decline in Brazil. 6 NORTH AMERICA Third Quarter Percent Change Unit Case Volume 1 1 Sparkling Beverages (1) (1) Still Beverages 7 4 Concentrate Sales 0 2 Price/Mix 3 3 Currency (1) (1) Acquisitions & Divestitures (1) (1) Reported Net Revenues 1 3 Organic Revenues * 3 6 Reported Income Before Taxes NM (22) Comparable CN Income Before Taxes * 4 11 NM: Calculation is not meaningful. * Organic revenue and comparable currency neutral (CN) before taxes are non-gaap financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule. YTD Organic revenue growth in the quarter was driven by positive price/mix. Acquisitions and divestitures primarily reflect the unfavorable impact of refranchised territories, partially offset by the benefit of our expanded distribution of Monster beverage products in. The expanded distribution contributed 1 point of unit case volume growth in both the quarter and year to date. After adjusting for the additional selling days in the first quarter and the impact of acquired volume, concentrate sales growth and unit case volume growth were in line year to date. Comparable currency neutral before taxes outpaced organic revenue growth in the quarter primarily due to lower input costs and the impact of our ongoing productivity initiatives, partially offset by increased marketing investments and a high single-digit unfavorable impact from structural changes. Structural changes included 5 points related to refranchised territories, as well as a unfavorable impact from the brand transfer agreement associated with the closing of the transaction with Monster Beverage Corporation and expanded distribution of Monster beverage products. We gained value share in total NARTD beverages for the 22 nd consecutive quarter driven by an increase in both the quality and quantity of our marketing investments and our continued rational approach to pricing and disciplined price/pack strategies. 7 ASIA PACIFIC Third Quarter Percent Change Unit Case Volume 4 3 Sparkling Beverages 3 3 Still Beverages 6 3 Concentrate Sales (2) 3 Price/Mix 1 (1) Currency (9) (9) Acquisitions & Divestitures (1) 0 Reported Net Revenues (11) (7) Organic Revenues * (1) 2 Reported Income Before Taxes (11) (8) Comparable CN Income Before Taxes * (2) 0 * Organic revenue and comparable currency neutral (CN) before taxes are non-gaap financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule. YTD Organic revenue declined in the quarter driven by a decrease in concentrate sales, partially offset by positive price/mix. Acquisitions and divestitures primarily reflect the unfavorable impact from the brand transfer agreement associated with the closing of the transaction with Monster Beverage Corporation. After adjusting for the additional selling days in the first quarter, concentrate sales growth trailed unit case volume growth year to date primarily due to timing of shipments in the prior year. We expect concentrate sales and unit case sales to be generally in line for the full year. Comparable currency neutral before taxes trailed organic revenue growth in the quarter primarily due to a low single-digit unfavorable impact from the closing of the transaction with Monster Beverage Corporation, partially offset by the efficient management of operating expenses. Unit case volume growth in the quarter reflected 5% growth in China and 4% growth in India, partially offset by a 2% decline in Japan. China's performance included double-digit growth in Trademark Coca-Cola and we gained value and volume share in sparkling beverages. 8 BOTTLING INVESTMENTS Third Quarter Percent Change Unit Case Volume 11 7 Reported Volume 8 7 Price/Mix (5) (4) Currency (11) (9) Acquisitions & Divestitures 4 2 Reported Net Revenues (4) (4) Organic Revenues * 3 4 Reported Income Before Taxes (27) (21) Comparable CN Income Before Taxes * * Organic revenue and comparable currency neutral (CN) before taxes are non-gaap financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule. YTD Organic revenue growth in the quarter was driven by reported volume growth, partially offset by unfavorable price/mix primarily attributable to geographic, channel and product mix. Comparable currency neutral before taxes outpaced organic revenue growth in the quarter primarily due to the continued strong performance of our Company-owned bottling operations in several markets including Germany, China and Vietnam OUTLOOK We estimate that the impact of structural items on full-year 2015 results will be a 1 point headwind on both revenues and before taxes. We expect fluctuations in foreign currency exchange rates to have an unfavorable impact on our comparable results in Based on current spot rates, our existing hedge positions, and the cycling of our prior year rates, we estimate that currency will be an approximate 7 point headwind on revenues, an 11 point headwind on operating and an 8 point headwind on before taxes for the full year. For the fourth quarter, we estimate that currency will be an approximate 6 point headwind on revenues, a 12 point headwind on operating and a 10 point headwind on before taxes. The underlying effective annual tax rate on operations for 2015 is expected to be 22.5%. We expect full-year 2015 share repurchases of $2.0 to $2.5 billion. We expect full-year 2015 comparable currency neutral EPS growth of 5%, in line with the range we laid out at the beginning of the year. 9 ITEMS IMPACTING COMPARABILITY For details on items impacting comparability in the quarter, refer to the Reconciliation of GAAP and Non-GAAP Financial Measures schedule. NOTES All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period. Comparable currency neutral before taxes is a non-gaap financial measure that excludes or otherwise adjusts for items impacting comparability and the impact of changes in foreign currency exchange rates. For details on these adjustments, refer to the Reconciliation of GAAP and Non-GAAP Financial Measures schedule. Comparable currency neutral before taxes (structurally adjusted) is a non-gaap financial measure that excludes or otherwise adjusts for items impacting comparability, the impact of changes in foreign currency exchange rates and the impact of structural items. For details on these adjustments, refer to the Reconciliation of GAAP and Non-GAAP Financial Measures schedule. Concentrate sales represents the amount of concentrates, syrups, beverage bases and powders sold by, or used in finished beverages sold by, the Company to its bottling partners or other customers. Concentrate sales/reported volume represents the percent change in revenues attributable to the increase (decrease) in concentrate sales volume for our geographic operating segments (expressed in equivalent unit cases) after considering the impact of structural changes. For our Investments operating segment, this represents the percent change in revenues attributable to the increase (decrease) in unit case volume after considering the impact of structural changes. Our Investments operating segment data reflects unit case volume growth for consolidated bottlers only and is computed on a reported basis. Organic revenue is a non-gaap financial measure that excludes or otherwise adjusts for the impact of changes in foreign currency exchange rates and acquisitions and divestitures, as applicable. For details on these adjustments, refer to the Reconciliation of GAAP and Non-GAAP Financial Measures schedule. Sparkling beverages means NARTD beverages with carbonation, including carbonated energy drinks and waters. 10 Still beverages means nonalcoholic beverages without carbonation, including noncarbonated waters, flavored waters and enhanced waters, juices and juice drinks, teas, coffees, sports drinks and noncarbonated energy drinks. All references to volume and volume percentage changes indicate unit case volume, unless otherwise noted. All volume percentage changes are computed based on average daily sales, unless otherwise noted. Unit case means a unit of measurement equal to 24 eight ounce servings of finished beverage. Unit case volume means the number of unit cases (or unit case equivalents) of Company beverages directly or indirectly sold by the Company and its bottling partners to customers. First quarter 2015 financial results were impacted by six additional days, and fourth quarter 2015 financial results will be impacted by six fewer days. Unit case volume results for the quarters are not impacted by the variance in selling days due to the average daily sales computation referenced above. The Company reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP). However, management believes that certain non- GAAP financial measures provide users with additional meaningful financial information that should be considered when assessing the Company s ongoing performance. Management also uses these non-gaap financial measu
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