What was the impact of the new accounting standard SFAS No. 142 on the company's net income?

The adoption of SFAS No. 142, effective January 1, 2002, resulted in a significant non-cash, after-tax charge of $367 million for the company's own operations and an additional $559 million for its proportionate share of equity method investees. This charge was due to the impairment of goodwill and indefinite-lived intangible assets, which are no longer amortized but reviewed annually for impairment.

How did the consolidation of Coca-Cola Erfrischungsgetraenke AG (CCEAG) affect the company's financial results?

The consolidation of CCEAG, the largest bottler in Germany, significantly impacted the financial statements. It led to an increase in net operating revenues and selling, administrative, and general expenses. However, it also decreased the gross profit margin and operating margin because bottling operations generally have lower margins compared to concentrate and syrup operations. The consolidation also increased long-term debt by approximately $800 million.

What is the reason for the decrease in gross profit margin despite revenue growth?

The decrease in gross profit margin, from 66.1% in the first six months of 2001 to 64.8% in the first six months of 2002, is primarily attributed to the consolidation of lower-margin bottling operations, notably CCEAG in Germany and certain Nordic bottling operations. While these acquisitions contribute to revenue growth and market share, they dilute the overall profit margin compared to the company's core concentrate and syrup business.

How did foreign currency fluctuations impact the company's results?

A stronger U.S. dollar negatively impacted The Coca-Cola Company's results. In the second quarter and first six months of 2002, the stronger dollar reduced operating income by approximately 3% compared to the same periods in 2001. It also had a negative impact on income per share, reducing it by $0.02 for the second quarter and $0.05 for the first six months of 2002. The company actively manages its foreign currency exposures through various strategies.

KO 10-Q Quarterly Report Q2 FY2002 — Revenue, Net Income, EPS

Summary

The Coca-Cola Company's second-quarter 2002 report (filed August 13, 2002) shows a notable increase in net operating revenues, primarily driven by volume growth and structural changes including the consolidation of its German bottling operations (CCEAG). Despite a rise in revenue, the company experienced a decrease in gross profit margin, largely attributable to the inclusion of lower-margin bottling businesses. Operating income saw a slight increase, though the operating margin declined, partly due to the impact of structural changes and a stronger U.S. dollar. Key financial events include the adoption of SFAS No. 142, which led to a significant non-cash charge related to the impairment of goodwill and intangible assets, impacting net income substantially. The company also adopted the fair value method for stock-based compensation under SFAS No. 123. Cash flow from operations remained robust, with investing activities showing continued investment in property, plant, and equipment, and financing activities reflecting debt management and share repurchases.

Key Highlights

1Worldwide unit case volume increased by 5% in Q2 2002 compared to Q2 2001, with international operations growing 5% and North America growing 4%.
2Net operating revenues increased by 15% to $5,368 million in Q2 2002, driven by a 6% increase in gallon shipments, consolidation of bottling operations (CCEAG), and price increases, partially offset by a stronger U.S. dollar.
3Gross profit margin decreased to 64.1% in Q2 2002 from 66.1% in Q2 2001, primarily due to the consolidation of lower-margin bottling operations.
4Operating income increased to $1,652 million in Q2 2002 from $1,513 million in Q2 2001, but the operating margin decreased to 30.8% from 32.5%.
5The adoption of SFAS No. 142 resulted in a significant non-cash, after-tax charge of $367 million for company operations and $559 million for equity method investees due to impairment of goodwill and intangible assets.
6Net cash provided by operating activities increased by $61 million to $2,156 million for the six months ended June 30, 2002, compared to the prior year, partly due to the collection of tax receivables from an Advance Pricing Agreement.
7Long-term debt increased by $1,555 million, driven by the consolidation of CCEAG ($800 million) and a $750 million debt issuance.

COCA COLA CO Quarterly Report for Q2 Ended Jun 30, 2002

Summary

Key Highlights

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