-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P+k9pOkEfR0kACvz5VVvqnSCHaO+9J/uW4meiuO4Txrg76odXKtAlmBLnzGLdO0f 6j4LDtPkk2/Mf7Q+lMINFw== 0001104659-07-010602.txt : 20070214 0001104659-07-010602.hdr.sgml : 20070214 20070214072204 ACCESSION NUMBER: 0001104659-07-010602 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070214 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070214 DATE AS OF CHANGE: 20070214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COCA COLA CO CENTRAL INDEX KEY: 0000021344 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 580628465 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02217 FILM NUMBER: 07613662 BUSINESS ADDRESS: STREET 1: ONE COCA COLA PLAZA CITY: ATLANTA STATE: GA ZIP: 30313 BUSINESS PHONE: 4046762121 MAIL ADDRESS: STREET 1: ONE COCA COLA PLAZA ZIP: 30313 8-K 1 a07-4539_18k.htm 8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

February 14, 2007

THE COCA-COLA COMPANY

(Exact name of registrant as specified in its charter)

Delaware

 

001-02217

 

58-0628465

(State or other

 

(Commission

 

(IRS Employer

jurisdiction

 

File Number)

 

Identification No.)

of incorporation)

 

 

 

 

 

One Coca-Cola Plaza

 

 

Atlanta, Georgia

 

30313

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (404) 676-2121

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 




 

Item 2.02.               Results of Operations and Financial Condition.

Attached as Exhibit 99.1 is a copy of a press release of The Coca-Cola Company, dated February 14, 2007, reporting The Coca-Cola Company’s financial results for the fourth quarter and full year 2006.  Such information, including the Exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.               Financial Statements and Exhibits.

Exhibit 99.1

Press Release of The Coca-Cola Company, dated February 14, 2007 reporting The Coca-Cola Company’s financial results for the fourth quarter and full year 2006.

 

2




 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

THE COCA-COLA COMPANY

 

(REGISTRANT)

 

 

 

 

 

Date:  February 14, 2007

By:

/s/ Ann T. Taylor

 

 

 

Ann T. Taylor

 

 

Vice President and Director,
Investor Relations

 




 

Exhibit Index

 

Exhibit No.

 

Exhibits

 

 

 

Exhibit 99.1

 

Press Release of The Coca-Cola Company, dated February 14, 2007, reporting The Coca-Cola Company’s financial results for the fourth quarter and full year 2006.

 



EX-99.1 2 a07-4539_1ex99d1.htm PRESS RELEASE OF THE COCA-COLA COMPANY, DATED FEBRUARY 14, 2007 . . .

Exhibit 99.1

 Media Relations Department

 P.O. Box 1734, Atlanta, GA 30301

 Telephone (404) 676-2121

 

FOR IMMEDIATE RELEASE

CONTACT:

Investors:

Ann Taylor

 

 

 

(404) 676-5383

 

 

 

 

 

 

 

 

Media:

Dana Bolden

 

 

 

(404) 676-2683

 

 

THE COCA-COLA COMPANY REPORTS

FOURTH QUARTER AND FULL YEAR 2006 RESULTS

·                  Worldwide unit case volume up 4 percent for the fourth quarter and the year, at the top end of the Company’s long-term growth targets.

·                  Balanced growth in the year with sparkling beverage unit case volume up 4 percent, the highest growth since 1998, and still beverage unit case volume up 7 percent.

·                  International unit case volume up 6 percent for the quarter and the year, led by 5 percent growth in Trademark Coca-Cola.

·                  Full year EPS of $2.16 up 6 percent; and $2.37 up 9 percent after considering items impacting comparability.

ATLANTA, Feb. 14, 2007—The Coca-Cola Company today reported full year earnings per share of $2.16, which included a net charge of $0.21 per share.  Full year earnings per share increased 6 percent on a reported basis and 9 percent after considering items impacting comparability.  The net charge for the year was primarily related to a non-cash impairment charge at Coca-Cola Enterprises Inc. (“CCE”), an equity investee.  Full year 2005 earnings per share were $2.04, which included a net charge of $0.13 per share.

Earnings per share for the fourth quarter were $0.29, which included a net charge of $0.23 per share.  Fourth quarter earnings per share decreased 19 percent on

-more-




a reported basis and increased 13 percent after considering items impacting comparability.  The net charge for the quarter was primarily related to the non-cash impairment charge at CCE.  Fourth quarter 2005 earnings per share were $0.36, which included a net charge of $0.10 per share.  (A reconciliation is provided on pages 21 and 22 of this release.)

Chairman and CEO Neville Isdell said, “I am pleased with our strong performance in the quarter as well as for the year.  Our results, once again, demonstrate our ability to deliver balanced growth across our product portfolio and our global markets.  In 2006, we further strengthened our business, enabling us to absorb fluctuations in individual markets and beverage categories, as we continue to grow overall.  We now have in place a firm foundation for delivering long-term sustainable growth.

“We continue to demonstrate that we can be successful growing sparkling beverages, while expanding our beverage portfolio.  With an improving set of capabilities, we delivered results at the top end of our long-term volume and profit growth targets.  We achieved strong results in key emerging markets including China, Russia and across Latin America, along with improved performance in Japan and Western Europe during the year.

“As for 2007, I am confident that our strategies are working.  We will continue to build our innovation pipeline - Enviga and Coca-Cola Zero were just the start - and focus on important markets like North America.  We will lead the Coca-Cola system with strengthened capabilities in consumer marketing, customer and commercial leadership and franchise leadership.  Our actions set us apart as the only truly global beverage company as we work to create long-term sustainable growth and value for shareowners.”

 (Sparkling beverages refers to all ready-to-drink nonalcoholic beverages with carbonation.  Still beverages refers to all ready-to-drink nonalcoholic beverages without carbonation.)

(All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.)

2




Financial Highlights

·                  Fourth quarter net operating revenues increased 7 percent.  Revenue growth reflected a 3 percent increase in gallon sales, a 1 percent currency benefit and a 3 percent favorable impact from pricing and mix.  Structural changes had a negligible impact.  For the year, net operating revenues increased 4 percent, reflecting a 4 percent increase in gallon sales and a 2 percent benefit from pricing and mix, partially offset by a 2 percent decrease from structural changes, primarily from changing the business model in Spain.  Currency had a negligible impact on full year revenues.

·                  Operating income in the quarter decreased 4 percent on a reported basis and increased 10 percent after considering items impacting comparability.  Fourth quarter operating income was reduced by $174 million in 2006 and increased by $5 million in 2005 for items impacting comparability.  Currency had a slight negative impact on operating income in the quarter.  Full year operating income increased 4 percent on a reported basis and 7 percent after considering items impacting comparability.  Currency negatively impacted full year operating income by 1 percent.

·                  The Company repurchased $2.5 billion of its stock in 2006 and intends to repurchase $2.5 to $3.0 billion of its stock for the full year 2007.  The Company paid $2.9 billion in dividends to shareowners in 2006.

·                  The Company’s reported tax rate for 2006 was 22.8 percent, which included a lower underlying effective tax rate on operations.  The 2006 underlying effective tax rate on operations was 22.4 percent versus the previous estimate of 23.5 percent, which resulted in a $0.03 per share tax benefit for the quarter and year.

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 10, 2006.)

Total Company

·                  Unit case volume increased 4 percent in the fourth quarter and for the year, achieving the top end of the Company’s long-term growth targets.

3




·                  International operations delivered 6 percent unit case volume growth in the quarter and for the year.  Fourth quarter unit case volume reflected strong growth across Latin America, double-digit growth in key emerging markets, including China, Russia, India, Nigeria, North and West Africa and the Middle East.  Western Europe delivered solid unit case volume growth and Japan unit case volume growth of 2 percent reflected sequential improvement in the quarter.  Double-digit unit case volume declines in the Philippines offset the benefit of brand acquisitions in the quarter and for the year.

·                  The Company continued to deliver strong growth in sparkling beverages, which increased unit case volume 3 percent in the quarter and 4 percent for the year - - the highest full year growth since 1998.  Key brands drove the results with Trademarks Coca-Cola and Fanta growing unit case volume 3 and 4 percent, respectively, for the quarter and the year, and Trademark Sprite increasing unit case volume 3 percent in the quarter and 5 percent for the year.

·                  In still beverages, Trademarks Dasani and POWERade continued their strong performance in the quarter.  Trademark Dasani increased unit case volume 23 percent, cycling 25 percent growth in the prior year quarter, and Trademark POWERade increased unit case volume 7 percent, cycling 20 percent growth in the prior year quarter.  Additionally, high single-digit growth in Trademark Minute Maid contributed to still beverage growth in the quarter.  For the year, Trademarks Dasani and POWERade grew unit case volume double-digits, while Trademark Minute Maid increased high single-digits.

Africa

 

Percent Change
From Prior Year

 

 

 

Fourth
Quarter

 

Full
Year

 

Unit Case Volume

 

6

%

4

%

 

 

 

 

 

 

Net Revenues

 

(9

)%

2

%

 

 

 

 

 

 

Operating Income

 

1

%

7

%

 

4




 

·                  The Africa Group’s unit case volume increased 6 percent in the quarter and 4 percent for the year.  Net revenues for the year increased 2 percent, primarily reflecting a 3 percent increase in gallon sales and positive price and mix, partially offset by a negative currency impact.  Full year operating income growth of 7 percent primarily reflected the net revenue increase and expense leverage.

·                  In the quarter, South Africa unit case volume decreased 2 percent, as results were impacted by an industry-wide temporary shortage in the supply of carbon dioxide.  Nigeria unit case volume increased 13 percent in the quarter reflecting improving business conditions and the cycling of a price increase implemented in September of 2005.  In addition, double-digit unit case volume growth in North and West Africa and solid unit case volume growth in East and Central Africa contributed to the overall unit case volume results.

East, South Asia and Pacific Rim

 

Percent Change
From Prior Year

 

 

 

Fourth
Quarter

 

Full
Year

 

Unit Case Volume

 

(6

)%

(5

)%

 

 

 

 

 

 

Net Revenues

 

26

%

12

%

 

 

 

 

 

 

Operating Income

 

Even

 

26

%

 

·                  The East, South Asia and Pacific Rim Group’s unit case volume decreased 6 percent in the quarter and 5 percent for the year, primarily reflecting unit case volume declines in the Philippines.  Net revenues for the year increased 12 percent, reflecting a 4 percent decrease in gallon sales, offset by positive pricing, currency benefits and strong product and country mix.  The full year operating income increase of 26 percent is due primarily to the cycling of a higher non-cash charge in the prior year for asset write-downs in the Philippines.

·                  In India, unit case volume increased 12 percent in the quarter, cycling a decline of 4 percent in the prior year quarter.  Continued investment in marketing initiatives around the quality and safety of our products and focus on execution in the

5




consolidated bottling operations resulted in solid growth and share gains in sparkling beverages and in juices and juice drinks for the quarter.

·                  In the Philippines, unit case volume declined double-digits in the quarter as affordability and availability issues continued to negatively impact performance.  In December, the Company and San Miguel Corporation (“SMC”) entered into an agreement for the Company to acquire, subject to certain conditions, the 65 percent ownership in Coca-Cola Bottlers Philippines, Inc. held by SMC.  The transaction is expected to close during the first quarter of 2007.

European Union

 

Percent Change
From Prior Year

 

 

 

Fourth
Quarter

 

Full
Year

 

Unit Case Volume

 

7

%

6

%

 

 

 

 

 

 

Net Revenues

 

(6

)%

(11

)%

 

 

 

 

 

 

Operating Income

 

5

%

2

%

 

·                  Unit case volume in the European Union Group increased 7 percent in the quarter and 6 percent for the year.  All key countries delivered solid growth in the quarter as marketing and innovation initiatives continued to gain traction and favorable weather benefited results.  In addition, the acquisitions of Apollinaris and Traficante in Germany and Italy, respectively, contributed 2 percentage points of unit case volume growth in the quarter and for the year.  Net revenues for the year declined 11 percent, reflecting a 4 percent increase in gallon sales, positive pricing and negligible currency impact, offset by a 16 percent negative impact from structural changes due to the change in the business model in Spain.  As noted in the Company’s 2005 Form 10-K, the Company transferred its canning rights to the Company’s bottlers in Spain at the beginning of 2006.  This change did not materially impact operating income for the group but did reduce net revenues and cost of goods sold by similar amounts.  Operating income increased 2 percent for the year, primarily reflecting the growth in gallon sales, positive pricing, partially

6




offset by a slight negative currency impact and the continued investment in key marketing initiatives, including the launch of Coca-Cola Zero in 9 countries.

·                  Unit case volume in Northwest Europe increased mid-single digits in the quarter, the fourth consecutive quarter of growth, as performance stabilized.  Growth was driven by mid-single digit unit case volume growth in sparkling beverages, led by growth of Trademark Coca-Cola, and strong growth in still beverages.  Coca-Cola Zero continued to perform well in Great Britain, driving sparkling beverage category share gains for the year.

·                  Unit case volume in Germany increased 7 percent in the quarter and 5 percent for the year, reflecting strong growth of Trademark Coca-Cola.  The results were driven by improved marketplace execution capabilities, the continued success of Coca-Cola Zero, increased availability in the discounter channel and generally favorable weather.  The acquisition of Apollinaris, a premium source water brand, contributed 6 percentage points of unit case volume growth in the quarter and 3 percentage points for the year.

Latin America

 

Percent Change
From Prior Year

 

 

 

Fourth 
Quarter

 

Full
Year

 

Unit Case Volume

 

7

%

7

%

 

 

 

 

 

 

Net Revenues

 

25

%

21

%

 

 

 

 

 

 

Operating Income

 

29

%

22

%

 

·                  The Latin America Group delivered strong unit case volume growth of 7 percent in the quarter and for the year, driven by 7 percent growth in Trademark Coca-Cola.  Net revenues for the year increased 21 percent, reflecting a 7 percent increase in gallon sales, positive pricing and mix as well as low single-digit currency benefits.  Operating income for the year increased 22 percent reflecting the net revenue increase, and the continued investment in key marketing initiatives.

7




·                  In Mexico, unit case volume increased 3 percent in the quarter and 5 percent for the year.  Results were driven by strong growth in Trademark Coca-Cola, which led to share gains.  Additionally, the Company and Coca-Cola FEMSA, S.A. de C.V. (“Coca-Cola FEMSA”) announced an agreement with the controlling shareholders of Jugos del Valle, S.A. de C.V. (“Jugos del Valle”) to conduct a public tender offer in Mexico for up to 100 percent of the outstanding public shares of Jugos del Valle, the second largest producer of packaged juices, nectars and fruit flavored beverages in Mexico, the largest producer in Brazil, and with presence in other Latin American markets.

·                  In Brazil, unit case volume growth for the quarter and the year was 9 percent, cycling 7 percent and 11 percent growth in the prior year quarter and year.  High single-digit unit case volume growth in sparkling beverages, including Trademark Coca-Cola, drove the results and led to share gains.

·                  In Argentina, strong sparkling beverage growth across core brands contributed to unit case volume growth of 12 percent in the quarter and 10 percent for the year.

North America

 

Percent Change
From Prior Year

 

 

 

Fourth 
Quarter

 

Full
Year

 

Unit Case Volume

 

(2

)%

Even

 

 

 

 

 

 

 

Net Revenues

 

2

%

5

%

 

 

 

 

 

 

Operating Income

 

14

%

8

%

 

·                  Unit case volume in the North America Group declined 2 percent in the quarter, cycling 3 percent growth from the prior year quarter.  Full year unit case volume was even.  Net revenues for the year increased 5 percent, reflecting even gallon sales, positive pricing and growth of finished goods businesses.  Operating income increased 8 percent for the year as favorable pricing and mix and operating expense leverage offset higher input costs in the finished goods businesses.

8




·                  Retail unit case volume growth decreased 3 percent in the quarter, cycling 4 percent growth in the prior year quarter.  Results in the quarter reflected weak sparkling beverage industry trends and a 19 percent decline in warehouse-delivered water due to the strategic decision to refocus resources behind the more profitable Dasani business.  Full year Retail unit case volume decreased 1 percent.

·                  Foodservice and Hospitality unit case volume was even for the quarter and increased 1 percent for the year.  Full year results benefited from growth in all key beverage categories including sparkling beverages, juice and water.

·                  Sparkling beverage unit case volume declined 3 percent in the quarter reflecting weak category trends.  For the year, sparkling beverage unit case volume declined 1 percent but gained category share.  Coca-Cola Zero continued to successfully cycle its launch in the summer of 2005 with unit case volume increasing double-digits in the quarter.  The Company’s portfolio of energy drinks continued to gain category share in the year as distribution and display activity increased.  Vault and Vault Zero continued to perform well in the quarter.

·                  Unit case volume for still beverages excluding warehouse-delivered water increased 4 percent in the quarter led by double-digit growth in Trademark Dasani, which continued to gain share, and double-digit growth in teas.  Trademark POWERade unit case volume increased mid-single digits, cycling 25 percent growth in the prior year quarter.  Total juice unit case volume declined mid-single digits in the quarter.  Warehouse-delivered juices continued to gain category share in the quarter, even though unit case volume was negatively impacted by price increases to cover higher ingredient costs.  This decline was partially offset by unit case volume growth in Odwalla and Trademark Simply juices.

North Asia, Eurasia and Middle East

 

Percent Change
From Prior Year

 

 

 

Fourth 
Quarter

 

Full
Year

 

Unit Case Volume

 

11

%

11

%

 

 

 

 

 

 

Net Revenues

 

(2

)%

(2

)%

 

 

 

 

 

 

Operating Income

 

(21

)%

(10

)%

9




·                  The North Asia, Eurasia and Middle East Group increased unit case volume 11 percent for the quarter and the year.  A return to unit case volume growth in Japan and continued strong double-digit unit case volume growth in China and Russia drove the unit case volume results for the quarter.  Net revenues for the year decreased 2 percent, reflecting a 7 percent increase in gallon sales and favorable pricing, offset by an unfavorable currency impact and negative country and product mix.  Operating income for the year decreased 10 percent, primarily driven by the decrease in net revenues and investment in key marketing initiatives.

·                  In Japan, unit case volume increased 2 percent in the quarter reflecting continued sequential improvement.  Growth across most core brands, including Trademarks Coca-Cola and Fanta, Sokenbicha and Aquarius, drove the volume improvements and share gains in the quarter.  Georgia Coffee gained category share as core flavors delivered solid growth; however, this was offset by underperformance of new flavor launches, resulting in overall volume declines for Georgia Coffee in the quarter.

·                  In China, Russia and Turkey, full year unit case volume grew double-digits led by strong growth in sparkling beverages.

Bottling Investments

 

Percent Change
From Prior Year

 

 

 

Fourth 
Quarter

 

Full
Year

 

Unit Case Volume

 

29

%

16

%

 

 

 

 

 

 

Net Revenues

 

39

%

22

%

 

 

 

 

 

 

Operating Income

 

48

%

n/a

 

 

·                  The Bottling Investments Group’s unit case volume increased 29 percent in the quarter and 16 percent for the year reflecting acquisitions of certain bottlers and unit case volume growth across the bottling group.  Net revenues increased 22 percent for the year due to the unit case volume increase, acquisitions, favorable pricing and

10




mix, and positive currency benefits.  Positive operating income results for the year reflect the focus on driving sustained financial growth through revenue increases and expense leverage.

Financial Review

Operating Results

Net operating revenues for the fourth quarter increased 7 percent, driven by a 3 percent increase in gallon sales, a 3 percent favorable impact from price and mix and a 1 percent currency benefit.  Structural changes had minimal impact in the quarter.  For the year, net operating revenues increased 4 percent, reflecting a 4 percent increase in gallon sales and a 2 percent favorable impact from pricing and mix, partially offset by a net 2 percent negative impact from structural change, primarily related to the change of the business model in Spain.  Excluding the impact of structural changes, net operating revenues increased 6 percent for the year.

Cost of goods sold increased 3 percent for the quarter.  This reflects a 3 percent increase in gallon sales along with increases in commodity-based input and freight costs and a 2 percent increase from currency, partially offset by a 2 percent decrease due to structural changes, primarily related to the change of the business model in Spain.  For the year, cost of goods sold was flat versus the prior year, reflecting a 4 percent increase in gallon sales, increased commodity-based input and freight costs and the cycling of the favorable high fructose corn syrup lawsuit settlement in the prior year, offset by a 6 percent decrease due to structural changes, primarily related to the change of the business model in Spain.

Selling, general and administrative expenses for the quarter increased 13 percent, reflecting continued investments in marketing, increased costs in the consolidated bottling operations, including acquisitions, a $100 million pre-tax donation to The Coca-Cola Foundation and a 2 percent increase from currency.  For the year, selling, general and administrative expenses increased 8 percent primarily as a result of continued investment in marketing initiatives, increased costs in the consolidated bottling operations, including acquisitions and a $100 million pre-tax donation to The Coca-Cola Foundation.  Excluding items impacting comparability and acquisitions of

11




bottling operations, selling, general and administrative expenses increased 6 percent in the quarter and for the year.

The Company had other operating charges in the fourth quarter amounting to $70 million pre-tax, primarily related to asset impairment and restructuring charges.  For the year, the Company had other operating charges of $185 million pre-tax, primarily related to asset impairment and restructuring charges.

Operating income for the quarter decreased 4 percent, reflecting the growth in gross profit offset by the investments in marketing, increased costs in the consolidated bottling operations and charges for items impacting comparability.  After considering items impacting comparability, operating income increased 10 percent for the quarter.  Currency had a slight negative impact in the quarter.  For the year, operating income increased 4 percent reflecting the growth in gross profit offset by investments in marketing, increased costs in the consolidated bottling operations and charges for items impacting comparability.  After considering items impacting comparability, operating income increased 7 percent for the year.  Currency negatively impacted operating income for the year by 1 percent.  Based on current spot rates and the anticipated benefits of hedging coverage in place, the Company currently expects currencies to have very little impact on operating income in 2007.

Equity income for the quarter and the year was reduced by $602 million pre-tax due to a non-cash impairment charge recorded by CCE and further reflected the reduction of the Company’s equity ownership positions in Coca-Cola FEMSA and Coca-Cola Icecek during the year.

In the fourth quarter, the Company sold a portion of its ownership interest in Coca-Cola FEMSA, reducing its interest from 39.6 percent to 31.6 percent, and recorded a gain of $175 million pre-tax.  In the second quarter, the Company recorded a gain of $123 million pre-tax related to the sale of a portion of its ownership interest in the initial public offering of Coca-Cola Icecek.

Effective Tax Rate

The reported effective tax rates for the quarter and year were 23.5 percent and 22.8 percent, respectively.  The rates were impacted primarily by the tax on the charges at equity investees being recorded at a 9 percent rate and reflect a full year underlying

12




effective tax rate on operations of 22.4 percent.  The Company previously estimated the underlying effective tax rate for the year to be 23.5 percent.  The Company’s underlying effective tax rate was 18.2 percent in the fourth quarter.  Income taxes for the quarter and the year were $0.03 per share lower than previously estimated.

The Company anticipates that its underlying effective tax rate on operations for the full year 2007 will be approximately 23.0 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.

Operating Structure

As previously announced, effective January 1, 2006, the Company made certain changes to its operating structure to establish a new, separate internal organization for its consolidated bottling operations and its unconsolidated bottling investments.  This new structure resulted in the reporting of a separate Bottling Investments operating segment, along with the six existing geographic operating segments and Corporate, beginning with the first quarter of 2006.  Reclassified operating segment information can be found in the Company’s Form 8-K filing dated April 10, 2006.

As recently 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.  Operating results will be reported based on the new geographic operating segments beginning with the first quarter of 2007.

Transfer of Spain Canning Rights

Effective January 1, 2006, the Company granted its bottling partners in Spain the rights to manufacture and distribute Company trademarked products in can packages.  At the same time, the Company also reduced future marketing support payments to the bottlers.  As a result, there was a reduction of revenues, but no material impact on gross profit.  Revenues for full year 2005 would have been reduced by approximately $779 million with no material impact to gross profit if the change had occurred as of January 1, 2005.

13




Items Impacting Prior Year Results

In 2005, fourth quarter reported earnings per share included a net charge of $0.10 per share due to an accrual for taxes related to the repatriation of foreign earnings and for charges incurred by an equity investee.  The 2005 third quarter reported earnings per share included a net charge of $0.03 per share due primarily to a non-cash charge related to asset write-downs in the Philippines, partially offset by a benefit related to the favorable resolution of tax matters.  The 2005 second quarter results included a net benefit of $0.04 per share due to a gain from the favorable high fructose corn syrup lawsuit settlement, the favorable resolution of tax matters, a reduction of the tax accrual related to the repatriation of foreign earnings, and a benefit from certain items impacting an equity investee.  In the first quarter of 2005, results included a net reduction of $0.05 per share due to a charge for accelerated amortization of stock-based compensation expenses and a tax charge related to the repatriation of foreign earnings, partially offset by a benefit related to the favorable resolution of tax matters and a gain on the issuance of stock by an equity investee.

Conference Call

The Company will host a conference call with investors and analysts to discuss the fourth quarter and full year 2006 results today at 8:00 a.m. (EST).  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.

14




THE COCA-COLA COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(UNAUDITED)

(In millions except per share data)

 

 

Three Months Ended

 

 

 

 

 

December 31,
2006

 

December 31,
2005

 

% Change

 

Net Operating Revenues

 

$

5,932

 

$

5,551

 

7

 

Cost of goods sold

 

2,063

 

1,996

 

3

 

Gross Profit

 

3,869

 

3,555

 

9

 

Selling, general and administrative expenses

 

2,587

 

2,293

 

13

 

Other operating charges

 

70

 

 

 

Operating Income

 

1,212

 

1,262

 

(4

)

Interest income

 

41

 

72

 

(43

)

Interest expense

 

47

 

61

 

(23

)

Equity income (loss) - net

 

(467

)

127

 

 

Other income (loss) - net

 

147

 

(27

)

 

Income Before Income Taxes

 

886

 

1,373

 

(35

)

Income taxes

 

208

 

509

 

(59

)

Net Income

 

$

678

 

$

864

 

(22

)

 

 

 

 

 

 

 

 

Diluted Net Income Per Share*

 

$

0.29

 

$

0.36

 

(19

)

Average Shares Outstanding - Diluted*

 

2,341

 

2,375

 

 

 


*         For the three months ended December 31, “Basic Net Income Per Share” was $0.29 for 2006 and $0.36 for 2005 based on “Average Shares Outstanding - Basic” of 2,336 and 2,375 for 2006 and 2005, respectively.

15




 

THE COCA-COLA COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(UNAUDITED)

(In millions except per share data)

 

 

Year Ended

 

 

 

 

 

December 31,
2006

 

December 31,
2005

 

% Change

 

Net Operating Revenues

 

$

24,088

 

$

23,104

 

4

 

Cost of goods sold

 

8,164

 

8,195

 

0

 

Gross Profit

 

15,924

 

14,909

 

7

 

Selling, general and administrative expenses

 

9,431

 

8,739

 

8

 

Other operating charges

 

185

 

85

 

 

Operating Income

 

6,308

 

6,085

 

4

 

Interest income

 

193

 

235

 

(18

)

Interest expense

 

220

 

240

 

(8

)

Equity income - net

 

102

 

680

 

(85

)

Other income (loss) - net

 

195

 

(93

)

 

Gains on issuances of stock by equity investees

 

 

23

 

 

Income Before Income Taxes

 

6,578

 

6,690

 

(2

)

Income taxes

 

1,498

 

1,818

 

(18

)

Net Income

 

$

5,080

 

$

4,872

 

4

 

 

 

 

 

 

 

 

 

Diluted Net Income Per Share*

 

$

2.16

 

$

2.04

 

6

 

Average Shares Outstanding - Diluted*

 

2,350

 

2,393

 

 

 


*                 For the year ended December 31, “Basic Net Income Per Share” was $2.16 for 2006 and $2.04 for 2005 based on “Average Shares Outstanding - Basic” of 2,348 and 2,392 for 2006 and 2005, respectively.

16




THE COCA-COLA COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(UNAUDITED)

(In millions except par value)

 

 

December 31,
2006

 

December 31,
2005

 

Assets

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

$

2,440

 

$

4,701

 

Marketable securities

 

150

 

66

 

Trade accounts receivable, less allowances of $63 and $72, respectively

 

2,587

 

2,281

 

Inventories

 

1,641

 

1,379

 

Prepaid expenses and other assets

 

1,623

 

1,778

 

Total Current Assets

 

8,441

 

10,205

 

 

 

 

 

 

 

Investments

 

 

 

 

 

Equity method investments

 

6,117

 

6,562

 

Cost method investments, principally bottling companies

 

473

 

360

 

Total Investments

 

6,590

 

6,922

 

 

 

 

 

 

 

Other Assets

 

2,701

 

2,648

 

Property, Plant and Equipment - net

 

6,903

 

5,831

 

Trademarks With Indefinite Lives

 

2,045

 

1,946

 

Goodwill

 

1,403

 

1,047

 

Other Intangible Assets

 

1,687

 

828

 

 

 

 

 

 

 

Total Assets

 

$

29,770

 

$

29,427

 

 

 

 

 

 

 

Liabilities and Shareowners’ Equity

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable and accrued expenses

 

$

5,055

 

$

4,493

 

Loans and notes payable

 

3,235

 

4,518

 

Current maturities of long-term debt

 

33

 

28

 

Accrued income taxes

 

567

 

797

 

Total Current Liabilities

 

8,890

 

9,836

 

 

 

 

 

 

 

Long-Term Debt

 

1,314

 

1,154

 

Other Liabilities

 

2,230

 

1,730

 

Deferred Income Taxes

 

539

 

352

 

 

 

 

 

 

 

Shareowners’ Equity

 

 

 

 

 

Common stock, $0.25 par value; Authorized - 5,600 shares; Issued - 3,511 shares
and 3,507 shares, respectively

 

878

 

877

 

Capital surplus

 

5,983

 

5,492

 

Reinvested earnings

 

33,468

 

31,299

 

Accumulated other comprehensive income (loss)

 

(1,414

)

(1,669

)

Treasury stock, at cost - 1,193 shares and 1,138 shares, respectively

 

(22,118

)

(19,644

)

Total Shareowners’ Equity

 

16,797

 

16,355

 

 

 

 

 

 

 

Total Liabilities and Shareowners’ Equity

 

$

29,770

 

$

29,427

 

 

17




THE COCA-COLA COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(UNAUDITED)

(In millions)

 

 

Year Ended

 

 

 

December 31,
2006

 

December 31,
2005

 

Operating Activities

 

 

 

 

 

Net income

 

$

5,080

 

$

4,872

 

Depreciation and amortization

 

938

 

932

 

Stock-based compensation expense

 

324

 

324

 

Deferred income taxes

 

(35

)

(88

)

Equity income or loss, net of dividends

 

124

 

(446

)

Foreign currency adjustments

 

52

 

47

 

Gains on issuances of stock by equity investees

 

 

(23

)

Gains on sales of assets, including bottling interests

 

(303

)

(9

)

Other operating charges

 

159

 

85

 

Other items

 

233

 

299

 

Net change in operating assets and liabilities

 

(615

)

430

 

Net cash provided by operating activities

 

5,957

 

6,423

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Acquisitions and investments, principally trademarks and bottling companies

 

(901

)

(637

)

Purchases of other investments

 

(82

)

(53

)

Proceeds from disposals of other investments

 

640

 

33

 

Purchases of property, plant and equipment

 

(1,407

)

(899

)

Proceeds from disposals of property, plant and equipment

 

112

 

88

 

Other investing activities

 

(62

)

(28

)

Net cash used in investing activities

 

(1,700

)

(1,496

)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Issuances of debt

 

617

 

178

 

Payments of debt

 

(2,021

)

(2,460

)

Issuances of stock

 

148

 

230

 

Purchases of stock for treasury

 

(2,416

)

(2,055

)

Dividends

 

(2,911

)

(2,678

)

Net cash used in financing activities

 

(6,583

)

(6,785

)

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

65

 

(148

)

 

 

 

 

 

 

Cash and Cash Equivalents

 

 

 

 

 

Net decrease during the year

 

(2,261

)

(2,006

)

Balance at beginning of year

 

4,701

 

6,707

 

Balance at end of year

 

$

2,440

 

$

4,701

 

 

18




THE COCA-COLA COMPANY AND SUBSIDIARIES

Operating Segments

(UNAUDITED)

(In millions except percentages)

 

Three Months Ended

 

 

 

Net Operating Revenues

 

Operating Income (Loss)

 

Income (Loss) Before Income
Taxes

 

 

 

December 31,
2006
(1)

 

December 31,
2005
(4)

 

% Fav. /
(Unfav.)

 

December 31,
2006
(2)

 

December 31,
2005
(5)

 

% Fav. /
(Unfav.)

 

December 31,
2006
(2) (3)

 

December 31,
2005
(5) (6)

 

% Fav. /
(Unfav.)

 

Africa

 

$

325

 

$

356

 

(9

)

$

137

 

$

135

 

1

 

$

134

 

$

130

 

3

 

East, South Asia and Pacific Rim

 

240

 

190

 

26

 

75

 

75

 

 

75

 

74

 

1

 

European Union

 

1,002

 

1,066

 

(6

)

480

 

458

 

5

 

480

 

460

 

4

 

Latin America

 

737

 

591

 

25

 

390

 

303

 

29

 

389

 

303

 

28

 

North America

 

1,666

 

1,628

 

2

 

419

 

366

 

14

 

418

 

367

 

14

 

North Asia, Eurasia and Middle East

 

955

 

977

 

(2

)

333

 

419

 

(21

)

339

 

425

 

(20

)

Bottling Investments

 

1,351

 

971

 

39

 

(59

)

(40

)

(48

)

(534

)

75

 

 

Corporate

 

27

 

18

 

50

 

(563

)

(454

)

(24

)

(415

)

(461

)

10

 

Eliminations

 

(371

)

(246

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

$

5,932

 

$

5,551

 

7

 

$

1,212

 

$

1,262

 

(4

)

$

886

 

$

1,373

 

(35

)

 


Note: Refer to the Company’s Form 8-K filing dated April 10, 2006 for more information on the changes to the Company’s operating structure.

(1) Intersegment revenues for the fourth quarter of 2006 were $8 million for Africa, $15 million for East, South Asia and Pacific Rim, $203 million for European Union, $42 million for Latin America, $16 million for North America, $72 million for North Asia, Eurasia and Middle East and $15 million for Bottling Investments.

(2) Operating income (loss) and income (loss) before income taxes for the fourth quarter of 2006 were reduced by $2 million for Africa, $25 million for East, South Asia and Pacific Rim, $2 million for European Union, $17 million for North Asia, Eurasia and Middle East, $27 million for Bottling Investments and $1 million for Corporate primarily due to contract termination costs related to production capacity efficiencies, asset impairments and other restructuring costs and were reduced by $100 million for Corporate as a result of a donation made to The Coca-Cola Foundation.

(3) Income (loss) before income taxes for the fourth quarter of 2006 was increased by $175 million for Corporate as a result of a net gain on the sale of Coca-Cola FEMSA shares and was reduced by $615 million for Bottling Investments, primarily due to our proportionate share of a non-cash impairment charge recorded by CCE.

(4) Intersegment revenues for the fourth quarter of 2005 were $2 million for Africa, $8 million for East, South Asia and Pacific Rim, $175 million for European Union, $37 million for Latin America and $24 million for North Asia, Eurasia and Middle East.

(5) Operating income (loss) and income (loss) before income taxes for the fourth quarter of 2005 were increased by $5 million for Corporate due to the high fructose corn syrup (HFCS) lawsuit settlement.

(6) Income (loss) before income taxes for the fourth quarter of 2005 was reduced by $49 million for Bottling Investments due to certain items impacting an equity investee.

19




 

THE COCA-COLA COMPANY AND SUBSIDIARIES

Operating Segments

(UNAUDITED)

(In millions except percentages)

Year Ended

 

 

Net Operating Revenues

 

Operating Income (Loss)

 

Income (Loss) Before Income
Taxes

 

 

 

December 31,
2006
(1)

 

December 31,
2005
(4)

 

% Fav. /
(Unfav.)

 

December 31,
2006
(2)

 

December 31,
2005
(5)

 

% Fav. /
(Unfav.)

 

December 31,
2006
(2) (3)

 

December 31,
2005
(5) (6)

 

% Fav. /
(Unfav.)

 

Africa

 

$

1,140

 

$

1,120

 

2

 

$

424

 

$

396

 

7

 

$

413

 

$

382

 

8

 

East, South Asia and Pacific Rim

 

872

 

779

 

12

 

358

 

284

 

26

 

358

 

283

 

27

 

European Union

 

4,364

 

4,911

 

(11

)

2,254

 

2,219

 

2

 

2,258

 

2,225

 

1

 

Latin America

 

2,616

 

2,158

 

21

 

1,438

 

1,176

 

22

 

1,434

 

1,175

 

22

 

North America

 

7,029

 

6,676

 

5

 

1,683

 

1,553

 

8

 

1,681

 

1,549

 

9

 

North Asia, Eurasia and Middle East

 

4,123

 

4,219

 

(2

)

1,557

 

1,735

 

(10

)

1,579

 

1,748

 

(10

)

Bottling Investments

 

5,198

 

4,262

 

22

 

18

 

(37

)

 

67

 

590

 

(89

)

Corporate

 

93

 

83

 

12

 

(1,424

)

(1,241

)

(15

)

(1,212

)

(1,262

)

4

 

Eliminations

 

(1,347

)

(1,104

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

$

24,088

 

$

23,104

 

4

 

$

6,308

 

$

6,085

 

4

 

$

6,578

 

$

6,690

 

(2

)

 


Note: Refer to the Company’s Form 8-K filing dated April 10, 2006 for more information on the changes to the Company’s operating structure.

(1) Intersegment revenues for 2006 were $37 million for Africa, $77 million for East, South Asia and Pacific Rim, $859 million for European Union, $132 million for Latin America, $16 million for North America, $137 million for North Asia, Eurasia and Middle East and $89 million for Bottling Investments.

(2) Operating income (loss) and income (loss) before income taxes for 2006 were reduced by $3 million for Africa, $44 million for East, South Asia and Pacific Rim, $36 million for European Union, $17 million for North Asia, Eurasia and Middle East, $88 million for Bottling Investments and $1 million for Corporate primarily due to contract termination costs related to production capacity efficiencies, asset impairments and other restructuring costs and were reduced by $100 million for Corporate as a result of a donation made to The Coca-Cola Foundation.

(3) Income (loss) before income taxes for 2006 was increased by $298 for Corporate as a result of a net gain on the sale of Coca-Cola FEMSA shares and the sale of a portion of our investment in Coca-Cola Icecek in an initial public offering and was reduced by $606 million for Bottling Investments, primarily due to our proportionate share of a non-cash impairment charge recorded by CCE.

(4) Intersegment revenues for 2005 were $13 million for Africa, $60 million for East, South Asia and Pacific Rim, $807 million for European Union, $94 million for Latin America and $130 million for North Asia, Eurasia and Middle East.

(5) Operating income (loss) and income (loss) before income taxes for 2005 were reduced by $85 million for East, South Asia and Pacific Rim primarily related to impairments of intangible assets, $3 million for Africa, $3 million for East, South Asia and Pacific Rim, $3 million for European Union, $4 million for Latin America,  $12 million for North America, $3 million for North Asia, Eurasia and Middle East and $22 million for Corporate as a result of accelerated amortization of stock-based compensation expense and were increased by $47 million for Corporate due to the HFCS lawsuit settlement.

(6) Income (loss) before income taxes for 2005 was reduced for Bottling Investments by $33 million due to certain items impacting an equity investee and by $4 million due to impairments of intangible assets and was increased by $23 million for Corporate due to non-cash pre-tax gains on issuances of stock primarily by Coca-Cola Amatil, one of our equity investees.

20




THE COCA-COLA COMPANY AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Measures

(UNAUDITED)

(In millions except per share data and percentages)

 

 

Three Months Ended December 31, 2006

 

 

 

 

 

 

 

 

 

Items Impacting Comparability

 

 

 

 

 

 

 

 

 

Reported
(GAAP)

 

Asset
Impairments/
Restructuring

 

Equity
Investees

 

Transaction
Gains

 

Foundation
Donation

 

Certain Tax
Matters (1)

 

After
Considering
Items
(Non-GAAP)

 

% Change
-
Reported
(GAAP)

 

% Change -
After
Considering
Items
(Non-GAAP)

 

Net Operating Revenues

 

$

5,932

 

 

 

 

 

 

 

 

 

 

 

$

5,932

 

7

 

7

 

Cost of goods sold

 

2,063

 

$

(4

)

 

 

 

 

 

 

 

 

2,059

 

3

 

3

 

Gross Profit

 

3,869

 

4

 

 

 

 

 

 

 

 

 

3,873

 

9

 

9

 

Selling, general and administrative expenses (2)

 

2,587

 

 

 

 

 

 

 

$

(100

)

 

 

2,487

 

13

 

8

 

Other operating charges

 

70

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

1,212

 

74

 

 

 

 

 

100

 

 

 

1,386

 

(4

)

10

 

Interest income

 

41

 

 

 

 

 

 

 

 

 

 

 

41

 

(43

)

(43

)

Interest expense

 

47

 

 

 

 

 

 

 

 

 

 

 

47

 

(23

)

(23

)

Equity income - net

 

(467

)

 

 

$

615

 

 

 

 

 

 

 

148

 

 

(16

)

Other income (loss) - net

 

147

 

 

 

 

 

$

(175

)

 

 

 

 

(28

)

 

 

Income Before Income Taxes

 

886

 

74

 

615

 

(175

)

100

 

 

 

1,500

 

(35

)

6

 

Income taxes

 

208

 

10

 

57

 

(76

)

38

 

$

37

 

274

 

(59

)

(18

)

Net Income

 

$

678

 

$

64

 

$

558

 

$

(99

)

$

62

 

$

(37

)

$

1,226

 

(22

)

13

 

Diluted Net Income Per Share

 

$

0.29

 

$

0.03

 

$

0.24

 

$

(0.04

)

$

0.03

 

$

(0.02

)

$

0.52

(3)

(19

)

13

 

Average Shares Outstanding - Diluted

 

2,341

 

2,341

 

2,341

 

2,341

 

2,341

 

2,341

 

2,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

65.2

%

 

 

 

 

 

 

 

 

 

 

65.3

%

 

 

 

 

Operating Margin

 

20.4

%

 

 

 

 

 

 

 

 

 

 

23.4

%

 

 

 

 

Effective Tax Rate

 

23.5

%

 

 

 

 

 

 

 

 

 

 

18.2

%(4)

 

 

 

 

 

 

Three Months Ended December 31, 2005

 

 

 

 

 

Items Impacting Comparability

 

 

 

 

 

Reported
(GAAP)

 

HFCS
Settlement

 

Resolution
of Tax
Matters

 

Repatriation
of Foreign
Earnings

 

Equity
Investee

 

After
Considering
Items
(Non-GAAP)

 

Net Operating Revenues

 

$

5,551

 

 

 

 

 

 

 

 

 

$

5,551

 

Cost of goods sold

 

1,996

 

$

5

 

 

 

 

 

 

 

2,001

 

Gross Profit

 

3,555

 

(5

)

 

 

 

 

 

 

3,550

 

Selling, general and administrative expenses

 

2,293

 

 

 

 

 

 

 

 

 

2,293

 

Operating Income

 

1,262

 

(5

)

 

 

 

 

 

 

1,257

 

Interest income

 

72

 

 

 

 

 

 

 

 

 

72

 

Interest expense

 

61

 

 

 

 

 

 

 

 

 

61

 

Equity income - net

 

127

 

 

 

 

 

 

 

$

49

 

176

 

Other income (loss) - net

 

(27

)

 

 

 

 

 

 

 

 

(27

)

Income Before Income Taxes

 

1,373

 

(5

)

 

 

 

 

49

 

1,417

 

Income taxes

 

509

 

(2

)

$

10

 

$

(188

)

4

 

333

 

Net Income

 

$

864

 

$

(3

)

$

(10

)

$

188

 

$

45

 

$

1,084

 

Diluted Net Income Per Share

 

$

0.36

 

$

0.00

 

$

0.00

 

$

0.08

 

$

0.02

 

$

0.46

 

Average Shares Outstanding -Diluted

 

2,375

 

2,375

 

2,375

 

2,375

 

2,375

 

2,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

64.0

%

 

 

 

 

 

 

 

 

64.0

%

Operating Margin

 

22.7

%

 

 

 

 

 

 

 

 

22.6

%

Effective Tax
Rate

 

37.1

%

 

 

 

 

 

 

 

 

23.5

%

 


Note: Items to consider for comparability include primarily charges, gains, and accounting changes.  Charges and accounting changes negatively impacting net income are reflected as increases to reported net income.  Gains and accounting changes positively impacting net income are reflected as deductions to reported net income.

(1)          Primarily related to changes in reserves related to certain tax matters.

(2)          Selling, general and administrative expenses excluding items impacting comparability and structural changes:

 

 

 

 

 

 

 

 

 

2006

 

2005

 

% Change

 

Reported selling, general and administrative expenses

 

$

2,587

 

$

2,293

 

13

%

Donation to The Coca-Cola Foundation

 

(100

)

 

 

 

Structural changes

 

(63

)

 

 

 

Selling, general and administrative expenses excluding items impacting comparability and structural changes

 

$

2,424

 

$

2,293

 

6

%

 

(3)          Per share amounts do not add due to rounding.

(4)          Effective tax rate calculated on full figures.

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 December 31, 2006 and December 31, 2005. 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.

21




 

THE COCA-COLA COMPANY AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Measures

(UNAUDITED)

 

 

Year Ended December 31, 2006

 

 

 

 

 

 

 

 

 

Items Impacting Comparability

 

 

 

 

 

 

 

 

 

Reported
(GAAP)

 

Asset
Impairments/
Restructuring

 

Equity
Investees

 

Transaction
Gains

 

Foundation
Donation

 

Certain Tax
Matters (1)

 

After
Considering
Items
(Non-GAAP)

 

% Change -
Reported
(GAAP)

 

% Change -
After
Considering
Items 
(Non-GAAP)

 

Net Operating Revenues (2)

 

$

24,088

 

 

 

 

 

 

 

 

 

 

 

$

24,088

 

4

 

4

 

Cost of goods sold

 

8,164

 

$

(4

)

 

 

 

 

 

 

 

 

8,160

 

0

 

(1

)

Gross Profit

 

15,924

 

4

 

 

 

 

 

 

 

 

 

15,928

 

7

 

7

 

Selling, general and administrative
expenses (3)

 

9,431

 

 

 

 

 

 

 

$

(100

)

 

 

9,331

 

8

 

7

 

Other operating charges

 

185

 

(185

)

 

 

 

 

 

 

 

 

 

 

 

Operating Income (4)

 

6,308

 

189

 

 

 

 

 

100

 

 

 

6,597

 

4

 

7

 

Interest income

 

193

 

 

 

 

 

 

 

 

 

 

 

193

 

(18

)

(18

)

Interest expense

 

220

 

 

 

 

 

 

 

 

 

 

 

220

 

(8

)

(8

)

Equity income - net

 

102

 

 

 

$

606

 

 

 

 

 

 

 

708

 

(85

)

(1

)

Other income (loss) - net

 

195

 

 

 

 

 

$

(298

)

 

 

 

 

(103

)

 

 

Income Before Income Taxes

 

6,578

 

189

 

606

 

(298

)

100

 

 

 

7,175

 

(2

)

6

 

Income taxes

 

1,498

 

30

 

57

 

8

 

38

 

$

(24

)

1,607

 

(18

)

1

 

Net Income

 

$

5,080

 

$

159

 

$

549

 

$

(306

)

$

62

 

$

24

 

$

5,568

 

4

 

7

 

Diluted Net Income Per Share

 

$

2.16

 

$

0.07

 

$

0.23

 

$

(0.13

)

$

0.03

 

$

0.01

 

$

2.37

 

6

 

9

 

Average Shares Outstanding - Diluted

 

2,350

 

2,350

 

2,350

 

2,350

 

2,350

 

2,350

 

2,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

66.1

%

 

 

 

 

 

 

 

 

 

 

66.1

%

 

 

 

 

Operating Margin

 

26.2

%

 

 

 

 

 

 

 

 

 

 

27.4

%

 

 

 

 

Effective Tax Rate

 

22.8

%

 

 

 

 

 

 

 

 

 

 

22.4

%

 

 

 

 

 

 

Year Ended December 31, 2005

 

 

 

 

 

Items Impacting Comparability

 

 

 

 

 

Reported
(GAAP)

 

HFCS
Settlement

 

Resolution
of Tax
Matters

 

Repatriation
of Foreign
Earnings

 

Issuances
of Stock by
Equity
Investees

 

Accelerated
Amortization of
Stock-Based
Compensation

 

Equity
Investee

 

Asset
Write-
downs

 

After
Considering
Items
(Non-GAAP)

 

Net Operating Revenues

 

$

23,104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

23,104

 

Cost of goods sold

 

8,195

 

$

47

 

 

 

 

 

 

 

 

 

 

 

 

 

8,242

 

Gross Profit

 

14,909

 

(47

)

 

 

 

 

 

 

 

 

 

 

 

 

14,862

 

Selling, general and administrative
expenses

 

8,739

 

 

 

 

 

 

 

 

 

$

(50

)

 

 

 

 

8,689

 

Other operating charges

 

85

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(85

)

 

Operating Income

 

6,085

 

(47

)

 

 

 

 

 

 

50

 

 

 

85

 

6,173

 

Interest income

 

235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

235

 

Interest expense

 

240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

240

 

Equity income - net

 

680

 

 

 

 

 

 

 

 

 

 

 

$

33

 

4

 

717

 

Other income (loss) - net

 

(93

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(93

)

Gain on issuances of stock by equity investees

 

23

 

 

 

 

 

 

 

$

(23

)

 

 

 

 

 

 

 

Income Before Income Taxes

 

6,690

 

(47

)

 

 

 

 

(23

)

50

 

33

 

89

 

6,792

 

Income taxes

 

1,818

 

(18

)

$

101

 

$

(315

)

(8

)

12

 

2

 

4

 

1,596

 

Net Income

 

$

4,872

 

$

(29

)

$

(101

)

$

315

 

$

(15

)

$

38

 

$

31

 

$

85

 

$

5,196

 

Diluted Net Income Per Share

 

$

2.04

 

$

(0.01

)

$

(0.04

)

$

0.13

 

$

(0.01

)

$

0.02

 

$

0.01

 

$

0.04

 

$

2.17

(5)

Average Shares Outstanding - Diluted

 

2,393

 

2,393

 

2,393

 

2,393

 

2,393

 

2,393

 

2,393

 

2,393

 

2,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

64.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64.3

%

Operating Margin

 

26.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26.7

%

Effective Tax Rate

 

27.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23.5

%

 


Note: Items to consider for comparability include primarily charges, gains, and accounting changes.  Charges and accounting changes negatively impacting net income are reflected as increases to reported net income.  Gains and accounting changes positively impacting net income are reflected as deductions to reported net income.

(1)           Primarily related to changes in reserves related to certain tax matters.

(2)           Net operating revenues excluding structural changes:

 

2006

 

2005

 

% Change

 

Reported net operating revenues

 

$

24,088

 

$

23,104

 

4

%

Structural changes

 

(460

)

(779

)

 

Net operating revenues excluding structural changes

 

$

23,628

 

$

22,325

 

6

%

 

(3)           Selling, general and administrative expenses excluding items impacting comparability and structural changes:

 

2006

 

2005

 

% Change

 

Reported selling, general and administrative expenses

 

$

9,431

 

$

8,739

 

8

%

Donation to The Coca-Cola Foundation

 

(100

)

 

 

 

Accelerated amortization of stock-based compensation expense

 

 

 

(50

)

 

Structural changes

 

(130

)

 

 

 

Selling, general and administrative expenses excluding items impacting comparability and structural changes

 

$

9,201

 

$

8,689

 

6

%

 

(4)           Operating Income for the year ended December 31, 2006 includes a negative currency impact of approximately 1%. Ongoing, currency neutral operating income growth 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 Table above for supplemental financial data and corresponding reconciliations to GAAP financial measures for the years ended December 31, 2006 and December 31, 2005. 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.

22




 

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; the availability and quality of water; changes in the nonalcoholic beverages business environment, including actions of competitors and changes in consumer preferences, including changes based on health and nutrition considerations and obesity concerns; increased competition; our ability to enter or expand our operations in emerging markets; foreign currency and interest rate fluctuations and other capital and financial market conditions; our ability to effectively align ourselves with our bottling system, including maintaining good relationships with our bottlers; 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, which could lead to production output disruptions; fluctuations in cost and shortages of raw materials, including the cost of energy; adoption of or changes to laws 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; changes in 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; regulatory and legal changes; our ability to achieve overall long-term goals; 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.

# # #

23



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