10-QPeriod: Q1 FY2008

COCA COLA CO Quarterly Report for Q1 Ended Mar 28, 2008

Filed April 25, 2008For Securities:KO

Summary

The Coca-Cola Company reported strong financial results for the first quarter ended March 28, 2008, with net operating revenues increasing by 21% to $7.38 billion and net income growing by 19% to $1.50 billion. Diluted earnings per share rose to $0.64 from $0.54 in the prior year's comparable period, reflecting robust top-line growth driven by a combination of volume increases, favorable currency movements, and strategic acquisitions. The company's global unit case volume saw a healthy increase of 6%, with particularly strong performance in Eurasia and the Pacific regions, though North America experienced flat volume growth amidst a challenging economic environment. Key drivers for the revenue increase included a 5% rise in concentrate sales volume, a 9% positive impact from currency fluctuations, and contributions from structural changes such as acquisitions. While gross profit margin saw a slight decrease, primarily due to the inclusion of lower-margin bottling operations acquired in prior periods, the company managed its operating expenses effectively, with SG&A growing in line with revenue. The company also continued its commitment to returning capital to shareholders through share repurchases and dividend payments.

Key Highlights

  • 1Net operating revenues increased 21% to $7.38 billion, driven by volume, favorable currency, and acquisitions.
  • 2Net income rose 19% to $1.50 billion, with diluted EPS growing to $0.64.
  • 3Global unit case volume increased by 6%, with strong growth in Eurasia (13%) and Pacific (10%).
  • 4North America unit case volume remained flat, impacted by a challenging economic environment, though still beverages and Coca-Cola Zero showed strength.
  • 5Favorable currency fluctuations contributed significantly, increasing operating income by approximately 11% for the quarter.
  • 6The company continued its strategy of acquiring bottling operations and brands, contributing to structural revenue changes.
  • 7Restructuring charges of $78 million were recorded, primarily related to streamlining operations and asset impairments.

Frequently Asked Questions

The 21% increase in net operating revenues to $7.38 billion was driven by several factors: a 5% increase in concentrate sales volume, a substantial 9% positive impact from foreign currency fluctuations, and structural changes primarily from acquisitions of bottling operations and brands. Additionally, price and product/geographic mix contributed 2% to the revenue growth.

North America experienced flat unit case volume growth compared to the prior year, reflecting the challenging U.S. economic environment. While sparkling beverages saw a decline, still beverages increased volume by 10%, boosted by brands like glacéau and Fuze. Notably, Coca-Cola Zero saw a volume increase of over 40%.

Yes, the company recorded $78 million in 'Other operating charges' in the first quarter of 2008. This primarily included approximately $50 million in restructuring activities related to streamlining operations globally (including plans to close a plant in Ireland) and approximately $28 million for the impairment of certain manufacturing assets. These charges impacted operating income and were largely concentrated in the Corporate segment.

The company experienced a significant favorable currency impact in the first quarter, increasing operating income by approximately 11%. Based on current expectations and hedging strategies, the company anticipates a favorable currency impact on 2008 operating income in the mid single-digit range. Management is evaluating opportunities to reinvest a portion of this currency benefit into marketing and productivity initiatives.