10-QPeriod: Q1 FY2023

COCA COLA CO Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 26, 2023For Securities:KO

Summary

The Coca-Cola Company reported a solid first quarter for 2023, demonstrating revenue growth driven by strategic pricing and a favorable mix of products and geographies, which more than offset a slight decline in unit case volume. Net operating revenues increased by 5% to $10.98 billion compared to the prior year's quarter. While gross profit margin saw a slight decrease due to foreign currency headwinds and higher commodity costs, the company effectively managed operating expenses, leading to consolidated operating income of $3.37 billion. Profitability was boosted by a significant gain from the refranchising of bottling operations in Vietnam. Diluted earnings per share rose to $0.72, up from $0.64 in the same period last year, reflecting strong operational execution and strategic initiatives. The company also maintained a strong balance sheet and sufficient liquidity.

Financial Highlights

54 data points
Beta

Revenue

$10.98B

60.7% Gross Margin

Net Income

$3.11B

28.3% Net Margin

EPS (Diluted)

$0.72

Total Assets

$97.40B

Cash & Equivalents

$12.00B

Free Cash Flow

-$116.00M

Financial Statements
Beta
Revenue$10.98B
Cost of Revenue$4.32B
Gross Profit$6.66B
SG&A Expenses$3.19B
Operating Income$3.37B
Interest Expense$372.00M
Net Income$3.11B
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)4.33B
Shares Outstanding (Diluted)4.34B

Key Highlights

  • 1Net operating revenues increased by 5% to $10.98 billion, driven by a 11% favorable price, product, and geographic mix, which more than offset a 6% unfavorable impact from foreign currency fluctuations.
  • 2Consolidated net income attributable to shareowners grew to $3.11 billion, resulting in diluted earnings per share of $0.72, up from $0.64 in the prior year's quarter.
  • 3Operating income decreased slightly by 1% to $3.37 billion, primarily due to unfavorable foreign currency impacts and increased operating expenses, despite the positive contributions from pricing and volume.
  • 4The company recognized a significant gain of $439 million from the refranchising of its bottling operations in Vietnam.
  • 5Despite inflationary pressures and currency headwinds, the company managed its gross profit margin at a healthy 60.7%.
  • 6Cash, cash equivalents, and short-term investments increased significantly to $13.17 billion, indicating a strong liquidity position.
  • 7The company continues to return value to shareholders, with a regular quarterly dividend approved and ongoing share repurchases.

Frequently Asked Questions

The Coca-Cola Company reported a 5% increase in net operating revenues for the first quarter of 2023, reaching $10.98 billion. This growth was primarily driven by a strong 'price, product, and geographic mix' which contributed 11%, compensating for a 6% negative impact from foreign currency fluctuations and a 1% decrease in concentrate sales volume.

The company anticipates that commodity costs will continue to unfavorably impact gross profit margin through the remainder of 2023. Furthermore, based on current market conditions and hedging strategies, foreign currency exchange rate fluctuations are expected to have an unfavorable impact on operating income and cash flows from operating activities for the rest of the year.

The company is actively litigating a U.S. federal income tax dispute concerning transfer pricing for tax years 2007-2009. While the company believes it is more likely than not to prevail on appeal, the potential aggregate incremental tax and interest liability could be substantial. As of March 31, 2023, the company updated its tax reserve to $432 million, and the estimated potential aggregate incremental tax and interest liability, if the IRS methodology were applied to subsequent years, is approximately $14 billion (as of December 31, 2022). A significant portion of this liability, estimated at $5.4 billion, may need to be paid related to the 2007-2009 tax years after the Tax Court's final decision.

While the filing does not provide specific details on inventory management for Q1 2023, it mentions a decrease in net cash provided by operating activities was partly due to 'payments resulting from the buildup of inventory in the prior year to manage potential supply chain disruptions'. This suggests a proactive approach to mitigate past supply chain challenges.