01—Abstract
Summary
Summary of the 10-Q filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Coca-Cola Company reported strong top-line growth in the first quarter of 2024, with net operating revenues increasing by 3% to $11.3 billiona, driven by a robust 13% contribution from price, product, and geographic mix.
This growth was achieved despite a 2% decline in worldwide concentrate sales volume and a 6% unfavorable impact from foreign currency fluctuations. Net income attributable to shareowners rose to $3.177 billionb, or $0.74 per diluted share, up from $3.107 billion, or $0.72 per diluted share, in the prior year period. The company also announced significant divestitures, including bottling operations in the Philippines, Bangladesh, and India, which generated substantial proceeds and contributed to other income.
Despite the positive revenue and net income figures, operating income saw a significant decrease of 36% to $2.141 billionc. This was largely due to substantial "Other Operating Charges," including a $760 million impairment charge for the BodyArmor trademark and a $765 million remeasurement of contingent consideration for the fairlife acquisition.
The company continues to manage its financial position, with a strong liquidity position and ongoing share repurchase programs. Investors should monitor the BodyArmor trademark performance and the significant ongoing tax litigation with the IRS, which, if unfavorable, could have a material impact.
02—Key points
Key Highlights
- Net operating revenues increased by 3% to $11.3 billion, driven by a strong 13% favorable impact from price, product, and geographic mix.
- Diluted Earnings Per Share (EPS) increased to $0.74 from $0.72 year-over-year.
- Significant divestitures of bottling operations generated substantial proceeds and contributed to "Other Income (Loss) - net."
- Operating income decreased by 36% to $2.141 billion, primarily due to $1.573 billion in "Other Operating Charges," including a $760 million impairment of the BodyArmor trademark and a $765 million remeasurement of contingent consideration for the fairlife acquisition.
- The company reported a strong cash position with $10.4 billion in cash and cash equivalents.
- Year-over-year, net cash provided by operating activities increased significantly by 230% to $528 million.
- The company continues to return capital to shareholders through dividends and share repurchases, with a quarterly dividend of $0.485 per share declared.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Coca Cola Co kept $0.28.
- Revenue$11.30B100.0%
- Cost of revenue−$4.24B37.5%
- Gross profit$7.07B62.5%
- Operating costs−$4.92B43.6%
- Operating income$2.14B18.9%
- Interest, other & tax$1.04B9.2%
- Net income$3.18B28.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $11.30B$10.98B | +2.9% |
| Cost of Revenue | $4.24B$4.32B | −1.9% |
| Gross Profit | $7.07B$6.66B | +6.0% |
| SG&A Expenses | $3.35B$3.19B | +5.2% |
| Operating Income | $2.14B$3.37B | −36.4% |
| Interest Expense | $382.00M$372.00M | +2.7% |
| Net Income | $3.18B$3.11B | +2.3% |
| EPS (Basic) | $0.74$0.72 | +2.8% |
| EPS (Diluted) | $0.74$0.72 | +2.8% |
| Shares Outstanding (Basic) | 4.31B4.33B | −0.4% |
| Shares Outstanding (Diluted) | 4.32B4.34B | −0.5% |
05—Questions
Frequently Asked Questions
What drove the increase in net operating revenues?
Net operating revenues increased by 3% to $11.3 billion primarily due to a favorable price, product, and geographic mix, which contributed 13% to the revenue increase. This was partially offset by a 2% decrease in concentrate sales volume and a 6% unfavorable impact from foreign currency fluctuations.
Why did operating income decrease significantly?
Operating income decreased by 36% to $2.141 billion primarily due to substantial "Other Operating Charges" totaling $1.573 billion. These included a significant impairment charge of $760 million for the BodyArmor trademark and a $765 million remeasurement of contingent consideration related to the fairlife acquisition.
What is the status of the IRS tax litigation?
The company is engaged in significant litigation with the IRS regarding transfer pricing for tax years 2007-2009. While the Tax Court has predominantly sided with the IRS, the company disagrees with the findings and intends to appeal. The potential aggregate incremental tax and interest liability, if the company does not prevail, is estimated to be substantial, potentially around $16 billion by December 31, 2023, with an estimated payment of $5.9 billion for the 2007-2009 tax years to be made after the Tax Court decision. The company believes it is more likely than not they will prevail on appeal but acknowledges the material risk.
How did the divestitures impact the financial results?
The company completed significant divestitures of bottling operations in the Philippines, Bangladesh, and certain territories in India. These transactions generated substantial cash proceeds and contributed to "Other Income (Loss) - net," boosting the overall income statement, but also impacted the "Bottling Investments" segment's revenue and volume metrics due to structural changes.
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