10-QPeriod: Q1 FY2003

COCA COLA CO Quarterly Report for Q1 Ended Mar 31, 2003

Filed April 25, 2003For Securities:KO

Summary

The Coca-Cola Company reported its first quarter 2003 results, showing a significant turnaround from the prior year's net loss. Net income for the quarter was $835 million, a substantial improvement from a net loss of $194 million in Q1 2002, which was impacted by a large after-tax charge related to the adoption of SFAS No. 142. Excluding that accounting change, net income before the cumulative effect was $835 million in Q1 2003, up from $732 million in Q1 2002. Net operating revenues increased by 10% to $4.5 billion, driven by a 4% increase in worldwide unit case volume and favorable currency movements, partially offset by price and product mix. The company also incurred significant "other operating charges" of $159 million related to announced streamlining initiatives primarily in North America and Germany. Despite these charges and ongoing economic challenges in some international markets like Venezuela and the Middle East, management expressed optimism for improved results in 2003, expecting to move beyond short-term external factors. The company also maintained its focus on expanding its brand portfolio, particularly in non-carbonated beverages.

Key Highlights

  • 1Net income for Q1 2003 was $835 million, a significant improvement from a net loss of $194 million in Q1 2002, driven by the absence of a large accounting charge present in the prior year.
  • 2Net operating revenues increased by 10% to $4.5 billion, fueled by a 4% rise in worldwide unit case volume and favorable foreign currency exchange rates.
  • 3Worldwide unit case volume grew 4%, with international operations up 4% and North American operations up 3%, demonstrating broad-based geographic growth.
  • 4The company incurred $159 million in "other operating charges" related to streamlining initiatives in North America and Germany, which are expected to result in total pretax charges of approximately $400 million for 2003.
  • 5Operating income decreased by 7% to $1,076 million, impacted by the aforementioned streamlining charges and increased stock-based compensation expenses.
  • 6The company received a $52 million pretax settlement related to a vitamin antitrust litigation, recorded as a reduction to Cost of Goods Sold.
  • 7Cash and cash equivalents increased significantly to $3,015 million from $2,126 million at the end of the prior year, partly due to cash accumulation for dividend payments.

Frequently Asked Questions

The company reported a net income of $835 million for the first quarter of 2003, a substantial improvement from a net loss of $194 million in the same period of 2002. This turnaround was significantly influenced by the absence of a large after-tax charge related to the adoption of SFAS No. 142, which negatively impacted the prior year's results.

Net operating revenues increased by 10% to $4.5 billion. This growth was primarily driven by a 4% increase in worldwide unit case volume, favorable foreign currency exchange rates (particularly a stronger Euro and Japanese Yen), and the inclusion of additional revenue from the consolidation of Coca-Cola Erfrischungsgetraenke AG (CCEAG). These factors were partially offset by price and product/geographic mix.

The company announced streamlining initiatives primarily in North America and Germany aimed at improving operational efficiency. These initiatives resulted in $159 million of 'other operating charges' in the first quarter of 2003, impacting operating income. The company expects total pretax charges of approximately $400 million for the full year 2003 related to these initiatives, with expected benefits of at least $50 million (pretax) in 2003 and $100 million (pretax) annually thereafter.

Yes, management highlighted several factors that could adversely impact operations. These include unstable economic and political conditions in the Middle East and Venezuela, the impact of Germany's new deposit law on non-returnable packages, and foreign currency fluctuations. The company is monitoring these situations closely.