10-QPeriod: Q2 FY2003

COCA COLA CO Quarterly Report for Q2 Ended Jun 30, 2003

Filed August 13, 2003For Securities:KO

Summary

Coca-Cola Company's Q2 2003 filing shows robust revenue growth, driven by a 6% increase in net operating revenues to $5.7 billion, primarily fueled by a 5% rise in international unit case volume and a 3% increase in North America. Acquisitions, particularly of Danone and Evian water brands and Seagram's mixers, played a significant role in this volume expansion. Despite higher revenues, gross profit margin saw a slight decrease due to the inclusion of lower-margin acquired businesses. The company also incurred approximately $70 million in restructuring charges related to streamlining initiatives in North America and Germany. Net income before the cumulative effect of accounting changes increased to $1.36 billion, or $0.55 per share, compared to $1.22 billion, or $0.49 per share, in the prior year's quarter.

Key Highlights

  • 1Net operating revenues increased by 6% to $5.7 billion for the second quarter, driven by a 5% increase in international unit case volume and 3% in North America.
  • 2Acquisitions, including Danone and Evian water brands and Seagram's mixers, significantly contributed to volume growth.
  • 3Gross profit margin decreased slightly to 62.9% from 64.1% year-over-year, impacted by the inclusion of lower-margin acquired businesses.
  • 4The company incurred $70 million in restructuring charges related to streamlining initiatives in North America and Germany during the quarter.
  • 5Net income before the cumulative effect of accounting changes rose to $1.36 billion, with diluted EPS of $0.55, up from $1.22 billion and $0.49 in Q2 2002.
  • 6The effective tax rate decreased to 22.2% from 27.0% in the prior year's quarter, benefiting from tax planning and improved earnings from lower-taxed locations.
  • 7Cash and cash equivalents increased significantly by $1.2 billion to $3.3 billion, primarily due to cash accumulation for dividends.

Frequently Asked Questions

Revenue growth was primarily driven by a 6% increase in net operating revenues to $5.7 billion. This was fueled by a 5% rise in worldwide unit case volume, with international operations growing 5% and North America growing 3%. Strategic acquisitions, such as the Danone and Evian water brands and Seagram's mixers, were key contributors to this volume increase.

The company recorded approximately $70 million in pretax charges in the second quarter of 2003 related to streamlining initiatives primarily in North America and Germany. These charges affected operating income and reduced earnings per share by $0.02.

The effective tax rate for the second quarter of 2003 was 22.2%, down from 27.0% in the prior year. Management expects the long-term effective tax rate on operations to be approximately 25.5% going forward, benefiting from tax planning and contributions from lower-taxed international locations.

The company is focused on expanding its family of brands, particularly its non-carbonated offerings, to provide consumers with more alternatives. The inclusion of brands like Evian and Danone waters in North America, and Risco in Mexico, through acquisitions and license agreements, demonstrates this strategy and has favorably impacted volume growth.