10-QPeriod: Q3 FY2015

COCA COLA CO Quarterly Report for Q3 Ended Jul 3, 2015

Filed July 29, 2015For Securities:KO

Summary

Coca-Cola Company (KO) reported its second-quarter 2015 financial results, indicating a mixed performance with a notable increase in net income driven by a significant gain from the Monster Beverage Corporation transaction. While net operating revenues saw a slight decrease compared to the prior year's period, primarily due to unfavorable foreign currency exchange rates, the company demonstrated resilience through effective cost management and strategic initiatives. Key developments during the period include substantial investments related to the Monster Transaction, which involved a strategic partnership and exchange of beverage businesses, contributing significantly to "Other Income (Loss) - Net." The company also continued its productivity and reinvestment programs aimed at strengthening brands and driving long-term growth. Despite ongoing challenges in certain international markets, particularly Venezuela, Coca-Cola maintained a strong liquidity position and continued its share repurchase program and dividend payments, signaling confidence in its operational stability and future prospects.

Financial Highlights

55 data points
Beta

Revenue

$12.16B

60.9% Gross Margin

Net Income

$3.11B

25.6% Net Margin

EPS (Diluted)

$0.71

Total Assets

$93.54B

Cash & Equivalents

$8.80B

Free Cash Flow

$2.95B

Financial Statements
Beta
Revenue$12.16B
Cost of Revenue$4.75B
Gross Profit$7.41B
SG&A Expenses$4.20B
Operating Income$2.54B
Interest Expense$128.00M
Net Income$3.11B
EPS (Basic)$0.71
EPS (Diluted)$0.71
Shares Outstanding (Basic)4.36B
Shares Outstanding (Diluted)4.41B

Key Highlights

  • 1Net operating revenues decreased by 3.3% year-over-year for the three months ended July 3, 2015, largely due to a 7% unfavorable foreign currency impact.
  • 2Consolidated net income attributable to shareowners increased significantly to $3,108 million for the three months ended July 3, 2015, compared to $2,595 million in the prior year, largely due to a $1,402 million net gain from the Monster Beverage Corporation transaction.
  • 3Gross profit margin slightly decreased to 60.9% for the three months ended July 3, 2015, from 61.7% in the prior year, influenced by structural changes and currency fluctuations.
  • 4The company repurchased approximately 15.2 million shares of common stock for $622 million during the quarter as part of its ongoing share repurchase program.
  • 5Total assets increased by $1,515 million to $93,538 million as of July 3, 2015, driven primarily by an increase in equity method investments and long-term debt.
  • 6Long-term debt increased by $6,914 million to $25,977 million, largely due to the issuance of euro-denominated debt and partially offset by early extinguishment of debt.
  • 7The company provided an updated estimate for its full-year 2015 effective tax rate of 22.5%.

Frequently Asked Questions

The substantial increase in net income for the three months ended July 3, 2015, was primarily driven by a net gain of $1,402 million recognized from the transaction with Monster Beverage Corporation. This transaction involved a strategic partnership, an exchange of global energy drink businesses, and an expansion of distribution territories.

Foreign currency exchange rates had a significant unfavorable impact on Coca-Cola's financial results. Net operating revenues decreased by 7% due to a stronger U.S. dollar against major foreign currencies. Operating income was also negatively affected, with the Eurasia & Africa, Europe, Latin America, Asia Pacific, and Bottling Investments segments experiencing adverse currency impacts.

Long-term debt increased significantly by $6,914 million to $25,977 million as of July 3, 2015. This increase was primarily due to the issuance of €8,500 million (approximately $9,421 million) in euro-denominated debt. The company also made significant debt payments, including retiring $1,500 million of long-term debt upon maturity and extinguishing $2,039 million prior to maturity, incurring $320 million in charges for early extinguishment.

Yes, the company incurred significant 'Other Operating Charges'. For the three months ended July 3, 2015, these totaled $669 million, including $92 million for productivity and reinvestment programs, $94 million for German bottling integration, and a $380 million impairment charge related to discontinuing energy products from the Glacéau portfolio due to the Monster transaction. For the six months ended July 3, 2015, these charges amounted to $902 million, also including $182 million for productivity programs, $129 million for German integration, the $380 million impairment charge, and an additional $108 million for Venezuelan currency issues and related write-downs.