10-QPeriod: Q1 FY2019

COCA COLA CO Quarterly Report for Q1 Ended Mar 29, 2019

Filed April 25, 2019For Securities:KO

Summary

Coca-Cola Company's first quarter 2019 report shows a solid increase in net operating revenues, up 5% year-over-year to $8,020 million, driven by a combination of volume growth and favorable price/product/geographic mix. Net income attributable to shareowners also saw a significant rise to $1,678 million, or $0.39 per diluted share, compared to $1,368 million, or $0.32 per diluted share, in the prior year period. The company completed the significant acquisition of Costa Limited in January 2019, which contributed to a substantial increase in goodwill and intangible assets on the balance sheet, as well as the establishment of the new 'Global Ventures' operating segment. While this acquisition boosted assets, it also led to a notable increase in net cash used in investing activities due to acquisition costs. The company's liquidity position remains strong, supported by robust operating cash flows and available credit lines.

Financial Highlights

53 data points
Beta

Revenue

$8.69B

61.3% Gross Margin

Net Income

$1.68B

19.3% Net Margin

EPS (Diluted)

$0.39

Total Assets

$88.35B

Cash & Equivalents

$5.85B

Free Cash Flow

$400.00M

Financial Statements
Beta
Revenue$8.69B
Cost of Revenue$3.37B
Gross Profit$5.33B
SG&A Expenses$2.77B
Operating Income$2.44B
Interest Expense$245.00M
Net Income$1.68B
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)4.27B
Shares Outstanding (Diluted)4.31B

Key Highlights

  • 1Net operating revenues increased by 5% to $8,020 million, driven by volume and favorable price/product/geographic mix.
  • 2Net income attributable to shareowners rose to $1,678 million ($0.39 per diluted share) from $1,368 million ($0.32 per diluted share) in the prior year.
  • 3Acquisition of Costa Limited for $4.9 billion completed in January 2019, significantly increasing goodwill and intangible assets.
  • 4Operating income increased by 29% to $2,336 million, benefiting from higher revenues, lower operating charges, and acquisitions.
  • 5Cash and cash equivalents decreased by 37% to $5,645 million, largely due to funding the Costa acquisition.
  • 6Long-term debt increased by 16% to $29,400 million, primarily from the issuance of euro-denominated debt.
  • 7The company reported a strong increase in unit case volume (2%) and concentrate sales volume (1%), with notable growth in Asia Pacific and Bottling Investments segments.

Frequently Asked Questions

The acquisition of Costa Limited in January 2019 for $4.9 billion was a significant event. It led to an increase in Goodwill by $2.5 billion and Trademarks by $2.4 billion on the balance sheet. It also contributed to the establishment of the new 'Global Ventures' operating segment. The acquisition also resulted in a substantial increase in net cash used in investing activities during the quarter.

Coca-Cola reported a 5% increase in net operating revenues for the first quarter of 2019, reaching $8,020 million, compared to $7,626 million in the same period of 2018. This growth was attributed to a 2% increase in worldwide unit case volume and a 1% increase in concentrate sales volume, alongside a favorable price, product, and geographic mix, which collectively boosted revenues by 5% and 5% respectively. However, currency fluctuations had a negative 6% impact on consolidated net operating revenues.

The IRS issued a Notice of Deficiency for tax years 2007-2009, claiming a potential additional federal income tax liability of approximately $3.3 billion plus interest related to transfer pricing. The company firmly believes its claims are without merit and is vigorously defending its position in U.S. Tax Court. A Tax Court trial was held in 2018, and post-trial briefs were filed in early 2019. The outcome remains uncertain, and if the IRS's position is sustained, it could have a material adverse impact on the company's financial position.

Long-term debt increased by 16% to $29,400 million as of March 29, 2019, primarily driven by the issuance of €3,500 million (approximately $3,906 million) in euro-denominated debt. This was part of the company's strategy to manage its cost of capital and leverage. Despite the increase in long-term debt, total liabilities also increased by 7% to $68,543 million.