10-QPeriod: Q1 FY2009

COCA COLA CO Quarterly Report for Q1 Ended Mar 31, 2009

Filed April 30, 2009For Securities:KO

Summary

The Coca-Cola Company's first quarter 2009 results show a slight decrease in net operating revenues to $7.17 billion from $7.38 billion in the prior year, largely due to a significant negative impact from foreign currency fluctuations as the U.S. dollar strengthened. Net income attributable to shareowners decreased to $1.35 billion from $1.50 billion, resulting in diluted EPS of $0.58 compared to $0.64 in the prior year. Despite revenue headwinds, the company demonstrated resilience with a slight increase in worldwide unit case volume and a focus on operational efficiency and cost management. The company also saw a substantial increase in cash and cash equivalents, partly in anticipation of the now-declined Huiyuan acquisition, and initiated longer-term debt to manage its capital structure. Key financial highlights include a robust operating income of $1.86 billion, driven by strong performance in international segments like Europe and Latin America, although impacted by restructuring charges and an asset impairment totaling $92 million. The company's balance sheet remains strong with total assets of $43.1 billion. Management is actively managing market risks through hedging strategies and maintaining a solid liquidity position with ample credit facilities, indicating confidence in meeting financial commitments.

Key Highlights

  • 1Net operating revenues decreased by 3% to $7.17 billion, primarily impacted by a 10% unfavorable currency fluctuation effect.
  • 2Consolidated net income attributable to shareowners declined to $1.35 billion ($0.58 diluted EPS) from $1.50 billion ($0.64 diluted EPS) in the prior year.
  • 3Worldwide unit case volume increased by 2% (4% on average daily sales basis due to 5 extra days in Q1 2009), with growth in emerging markets like Eurasia & Africa and Latin America offsetting declines in North America and Europe.
  • 4Operating income remained strong at $1.86 billion, though slightly down from $1.87 billion, with operating margin improving slightly to 26.0% from 25.4% on a consolidated basis.
  • 5The company reported $92 million in other operating charges, including restructuring costs ($52 million), asset impairment ($23 million), and productivity initiatives ($17 million).
  • 6Cash and cash equivalents significantly increased by $2.1 billion to $6.8 billion, partly due to funds held for the abandoned Huiyuan acquisition.
  • 7The company issued $2.25 billion in long-term debt to replace short-term debt and manage its capital structure.

Frequently Asked Questions

The primary reason for the decline in net operating revenues was the unfavorable impact of foreign currency fluctuations, specifically a stronger U.S. dollar against major currencies. This had a 10% negative effect on net operating revenues.

The company generated $873 million in cash from operating activities. They also significantly increased their cash and cash equivalents by $2.1 billion to $6.8 billion. This increase was partly due to funds earmarked for the China Huiyuan Juice Group acquisition, which was ultimately declined by Chinese regulators. The company also issued long-term debt to manage its capital structure.

The company incurred $92 million in other operating charges, which included $52 million for restructuring costs (largely related to integrating German bottling operations), $23 million for an asset impairment (due to a change in the useful life of an intangible asset), and $17 million for productivity initiatives. These charges reduced operating income.

The company did not repurchase common stock under its authorized programs during the first quarter of 2009. They had curtailed the program in late 2008 in anticipation of the Huiyuan acquisition and were evaluating its reactivation after the deal fell through, considering market conditions and the need to maintain financial flexibility.