10-QPeriod: Q3 FY2020

COCA COLA CO Quarterly Report for Q3 Ended Sep 25, 2020

Filed October 22, 2020For Securities:KO

Summary

The Coca-Cola Company's third-quarter 2020 filing shows a decrease in net operating revenues by 9% year-over-year, largely impacted by the ongoing COVID-19 pandemic which shifted consumer demand towards at-home consumption and away from traditional away-from-home channels. This resulted in a consolidated net income attributable to shareowners of $1.737 billion, or $0.40 per diluted share, compared to $2.593 billion, or $0.60 per diluted share, in the prior year period. Despite revenue challenges, the company demonstrated effective cost management, with selling, general, and administrative expenses decreasing by 19% due to reduced marketing spend and ongoing productivity initiatives. The company maintained a strong liquidity position with $11.385 billion in cash and cash equivalents and $7.347 billion in short-term investments, indicating resilience amidst the economic downturn.

Financial Highlights

52 data points
Beta

Revenue

$8.65B

59.9% Gross Margin

Net Income

$1.74B

20.1% Net Margin

EPS (Diluted)

$0.40

Total Assets

$97.18B

Cash & Equivalents

$11.38B

Free Cash Flow

$3.21B

Financial Statements
Beta
Revenue$8.65B
Cost of Revenue$3.47B
Gross Profit$5.18B
SG&A Expenses$2.51B
Operating Income$2.30B
Interest Expense$660.00M
Net Income$1.74B
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)4.30B
Shares Outstanding (Diluted)4.32B

Key Highlights

  • 1Net operating revenues decreased by 9% to $8.652 billion for the three months ended September 25, 2020, compared to $9.507 billion in the prior year, primarily due to the impact of COVID-19 on away-from-home consumption channels.
  • 2Diluted earnings per share (EPS) were $0.40, a decrease from $0.60 in the comparable prior year period.
  • 3Consolidated net income attributable to shareowners was $1.737 billion, down from $2.593 billion in the prior year's third quarter.
  • 4Selling, general, and administrative expenses decreased by 19% to $2.511 billion, reflecting cost management efforts and reduced marketing expenditures.
  • 5The company acquired the remaining 57.5% interest in fairlife, LLC for $979 million in cash, further strengthening its position in the value-added dairy category.
  • 6Cash and cash equivalents and short-term investments totaled $18.732 billion as of September 25, 2020, providing substantial liquidity.
  • 7The company incurred $372 million in other operating charges during the quarter, primarily related to strategic realignment initiatives and restructuring.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Coca-Cola's third-quarter 2020 results. It led to a decrease in unit case volume, particularly in away-from-home channels (like restaurants and entertainment venues), as consumer demand shifted towards at-home consumption. This resulted in a 9% decrease in net operating revenues compared to the prior year.

Coca-Cola maintained a strong liquidity position, with cash and cash equivalents, and short-term investments totaling $18.732 billion as of September 25, 2020. This robust liquidity, combined with effective cost management and a focus on essential capital projects, indicates financial resilience to navigate the ongoing economic uncertainties.

Yes, a key development was the acquisition of the remaining 57.5% interest in fairlife, LLC, a value-added dairy company, for $979 million. This acquisition is expected to enhance the company's portfolio in a growing category. The filing also mentions other divestitures and refranchising activities, but fairlife was the most significant acquisition impacting the period.

The primary risk highlighted is the continued impact of the COVID-19 pandemic, including potential prolonged negative effects on sales, consumer demand shifts, economic downturns in key markets, and potential supply chain disruptions. Additionally, the company faces risks related to foreign currency fluctuations and ongoing legal matters, such as the IRS tax dispute.