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THE FOURTH QUARTER AND FULL YEAR 2002 RESULTS
ATLANTA, February 12, 2003 - The Financial Highlights
* Reflects rounding to ensure the sum of quarterly per share amounts equals
Operational Highlights
North America
Asia
Latin America
Europe, Eurasia and Middle East
Africa
Accounting For Stock-Based Compensation Expense Streamlining Initiatives Conference Call -- Financial Section Follows --
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Three Months Ended |
|||
| Net Operating Revenues | $ 4,795 | $ 4,238 | 13 |
| Cost of goods sold | 1,701 | 1,428 | 19 |
| Gross Profit |
3,094 | 2,810 | 10 |
| Selling, general
and administrative expenses (includes $91 in 2002 and $0 in 2001 related to the impact of the adoption of the fair value method of accounting for stock-based compensation) |
1,804 | 1,562 | 15 |
| Operating Income |
1,290 | 1,248 | 3 |
| 53 | 98 | (46) | |
| Interest expense | 43 | 55 | (22) |
| 34 | (15) | -- | |
| (61) | 16 | -- | |
| Income Before Income Taxes | 1,273 | 1,292 | (1) |
| Income taxes | 343 | 378 | (9) |
| Net Income | $ 930 | $ 914 | 2 |
| Diluted Net Income Per Share* | $ 0.38 | $ 0.37 | 3 |
| Average Shares Outstanding - Diluted* | 2,478 | 2,487 | -- |
|
* For the fourth quarter, "Basic Net Income Per Share" was
$0.38 for 2002 and $0.37 for 2001 based on "Average Shares Outstanding
- Basic" of 2,474 and 2,487 for 2002 and 2001, respectively. |
|||
| Year
Ended December 31, |
|||
| Net Operating Revenues | $19,564 | $17,545 | 12 |
| Cost of goods sold | 7,105 | 6,044 | 18 |
| Gross Profit |
12,459 | 11,501 | 8 |
expenses (includes $373 in 2002 and $0 in 2001 related to the impact of the adoption of the fair value method of accounting for stock-based compensation) |
7,001 | 6,149 | 14 |
| Operating Income |
5,458 | 5,352 | 2 |
| 209 | 325 | (36) | |
| Interest expense | 199 | 289 | (31) |
| 384 | 152 | 153 | |
| (353) | 130 | -- | |
| Income Before Income Taxes and Cumulative Effect of Accounting Change | 5,499 | 5,670 | (3) |
| Income taxes | 1,523 | 1,691 | (10) |
| Net Income Before Cumulative Effect of Accounting Change | 3,976 | 3,979 | -- |
| Cumulative effect
of accounting change, net of income taxes SFAS No. 142: Company Operations |
(367) | -- | -- |
| Equity Investees | (559) | -- | -- |
| SFAS No. 133 | -- | (10) | -- |
| Net Income | $ 3,050 | $ 3,969 | (23) |
| Diluted Net Income Per Share Before Cumulative Effect of Accounting Change | $ 1.60 | $ 1.60 | -- |
| Diluted Net Income Per Share* | $ 1.23 | $ 1.60 | (23) |
| Average Shares Outstanding - Diluted* | 2,483 | 2,487 | -- |
|
* For the year, "Basic Net Income Per Share" was $1.23 for
2002 and $1.60 for 2001 based on "Average Shares Outstanding - Basic"
of 2,478 and 2,487 for 2002 and 2001, respectively. |
|||
| December
31, 2002 |
December
31, 2001 |
|
| Current Assets | ||
| Cash and cash equivalents | $ 2,126 | $ 1,866 |
| Marketable securities | 219 | 68 |
| 2,345 | 1,934 | |
|
Trade accounts receivable, less |
2,097 | 1,882 |
| Inventories | 1,294 | 1,055 |
| Prepaid expenses and other assets | 1,616 | 2,300 |
| Total Current Assets | 7,352 | 7,171 |
| Investments and Other Assets | ||
| Equity method investments | ||
| |
972 | 788 |
| Company S.A. |
872 | 791 |
| |
492 | 432 |
| Other, principally bottling companies | 2,401 | 3,117 |
| Cost method
investments, principally bottling companies |
254 | 294 |
| Other assets | 2,694 | 2,792 |
| 7,685 | 8,214 | |
| Property, Plant and Equipment | ||
| Land | 385 | 217 |
| Building and improvements | 2,332 | 1,812 |
| Machinery and equipment | 5,888 | 4,881 |
| Containers | 396 | 195 |
| 9,001 | 7,105 | |
| Less allowances for depreciation | 3,090 | 2,652 |
| 5,911 | 4,453 | |
| Trademarks and Other Intangible Assets | 3,553 | 2,579 |
| $ 24,501 | $ 22,417 | |
| Liabilities and Share-Owners' Equity | ||
| December
31, 2002 |
December
31, 2001 |
|
| Current Liabilities | ||
| Accounts
payable and accrued expenses |
$ 3,692 | $ 3,679 |
| Loans and notes payable | 2,475 | 3,743 |
| Current
maturities of long-term debt |
180 | 156 |
| Accrued income taxes | 994 | 851 |
| Total Current Liabilities | 7,341 | 8,429 |
| Long-Term Debt | 2,701 | 1,219 |
| Other Liabilities | 2,260 | 961 |
| Deferred Income Taxes | 399 | 442 |
| Share-Owners' Equity | ||
| Common Stock, $.25 par value | ||
| Authorized:
5,600,000,000 shares |
||
| Issued:
3,490,818,627 shares in 2002; 3,491,465,016 shares in 2001 |
873 | 873 |
| Capital surplus | 3,857 | 3,520 |
| Reinvested earnings | 24,506 | 23,443 |
| Accumulated
other comprehensive income and unearned compensation on restricted stock |
(3,047) | (2,788) |
| 26,189 | 25,048 | |
| Less treasury
stock, at cost (1,019,839,490 shares in 2002; 1,005,237,693 shares in 2001) |
14,389 | 13,682 |
| 11,800 | 11,366 | |
| $ 24,501 | $ 22,417 | |
 |
Year
Ended December 31, |
|
| Operating Activities | ||
| Net income | $ 3,050 | $ 3,969 |
| Depreciation and amortization | 806 | 803 |
| Stock-Based
compensation expense |
365 | 41 |
| Deferred income taxes | 40 | 56 |
| Equity
income or loss, net of dividends |
(256) | (54) |
| Foreign currency adjustments | (76) | (60) |
| Gain
on issuances of stock by equity investee |
-- | (91) |
| (Gains) losses on sales of assets | 3 | (85) |
| Cumulative
effect of accounting changes |
926 | 10 |
| Other items | 291 | (17) |
| Net
change in operating assets and liabilities |
(407) | (462) |
| Net
cash provided by operating activities |
4,742 | 4,110 |
| Investing Activities | ||
| Acquisitions
and investments, principally trademarks and bottling companies |
(544) | (651) |
| Purchases
of investments and other assets |
(156) | (456) |
| Proceeds
from disposals of investments and other assets |
243 | 455 |
| Purchases
of property, plant and equipment |
(851) | (769) |
| Proceeds
from disposal of property, plant and equipment |
69 | 91 |
| Other investing activities | 52 | 142 |
| Net
cash used in investing activities |
(1,187) | (1,188) |
| Financing Activities | ||
| Issuances of debt | 1,622 | 3,011 |
| Payments of debt | (2,378) | (3,937) |
| Issuances of stock | 107 | 164 |
| Purchases of stock for treasury | (691) | (277) |
| Dividends | (1,987) | (1,791) |
| Net
cash used in financing activities |
(3,327) | (2,830) |
| Effect
of Exchange Rate Changes on Cash and Cash Equivalents |
32 | (45) |
| Cash and Cash Equivalents | ||
| Net increase during the period | 260 | 47 |
| Balance at beginning of period | 1,866 | 1,819 |
| Balance at end of period | $ 2,126 | $ 1,866 |
|
2002 | 2001 | ||
|
Net Operating Revenues
|
Operating Income* |
Income before income taxes and cumulative effect
of accounting change*
|
Net Operating Revenues
|
Operating Income
|
Income before income taxes and cumulative effect
of accounting change
|
||
| North America |
$ 6,264
|
$ 1,494
|
$ 1,515
|
$ 5,729
|
$ 1,480
|
$ 1,472
|
|
| Europe, Eurasia & Middle East |
5,262
|
1,612
|
1,540
|
3,961
|
1,461
|
1,413
|
|
| Asia |
5,054
|
1,820
|
1,848
|
4,861
|
1,763
|
1,808
|
|
| Latin America |
2,089
|
1,033
|
1,081
|
2,181
|
1,094
|
1,279
|
|
| Africa |
684
|
224
|
187
|
633
|
276
|
262
|
|
| Corporate |
211
|
(725)
|
(672)
|
|
180
|
(722)
|
(564)
|
| Consolidated |
$ 19,564
|
$ 5,458*
|
$ 5,499*
|
$ 17,545
|
$ 5,352
|
$ 5,670
|
* 2002 Operating income and Income before income taxes
and cumulative
effect of accounting change include the impact
of adopting the fair value
method of accounting for stock-based compensation
under SFAS
No. 123. The full-year impact was a non-cash adjustment
for 2002
of $373 million pre-tax, or $0.11 per share after
tax.
The impact on 2002 operating segment results is as follows:
|
North America
|
$ 119
|
|
|
Europe, Eurasia & Middle East
|
51
|
|
|
Asia
|
51
|
|
|
Latin America
|
22
|
|
|
Africa
|
24
|
|
|
Corporate
|
106
|
|
|
Consolidated
|
$ 373
|
|
There is no impact on 2001 financial results from the adoption of SFAS No. 123.
| The Fourth Quarter and Full Year 2002 Unit Case Volume Results |
| Unit Case Volume (% Change) |
||
| 2002 vs. 2001 | ||
| Fourth Quarter | Full Year | |
| Worldwide | 6 | 5 |
| International Operations | 6 | 5 |
| Latin America | 5 | 2 |
| Europe, Eurasia and Middle East | 5 | 5 |
| Africa | 7 | 7 |
| Asia | 10 | 10 |
| North America Operations | 5 | 6 |
Financial Review
Operating Results -
Revenues for the full year increased 12 percent, reflecting a 5 percent increase in gallon shipments, pricing of concentrate, the impact from structural change (primarily the consolidation of the bottling operations in Germany) and the inclusion of Evian and the Danone water brands. The following reflects net operating revenues from the Company's operations:
| (in millions) | 2002 | 2001 | |
|
Company Operations, Excluding Bottling
|
$ 17,157 | $ 16,402 | |
|
Company-Owned Bottling Operations
|
2,407 | 1,143 | |
|
Consolidated Net Operating Revenues
|
$ 19,564 | $ 17,545 | |
Cost of goods sold increased at a rate greater than revenues, resulting from the consolidation of lower margin bottling operations (primarily Germany) and from water brand transactions in North America.
Selling, general and administrative expenses increased 14 percent during the year on a reported basis. Approximately 9 points of this increase resulted from the impact of adopting SFAS No. 123 (stock-based compensation expense), SFAS No. 142 (goodwill and intangible assets), structural changes and incremental marketing expenses from the prior year ($0.08 per share).
Operating income was negatively impacted by approximately 3 percent for the full year because of the relative strength of the U.S. dollar when compared to the prior year. Year-over-year weakening of the Japanese Yen, the Argentine Peso, the Venezuelan Bolivar, the Brazilian Real, the Mexican Peso and the South African Rand drove the negative currency impact, partially offset by a strengthening Euro.
Non-Operating Items -
Equity income for the year has improved primarily because of the overall
improving health of the Coca-Cola bottling system around the world and
reduced amortization expense resulting from the implementation of SFAS
No. 142. The full year amount was negatively impacted by $0.01 per share
from a charge recorded by the Company's equity investees in Latin America
during the third quarter.
The Company recorded a first quarter non-cash charge of $157 million
in "Other income (loss) - net" primarily related to investments
in Latin America caused by the currency devaluation and economic crisis
in Argentina. The Company expects to realize a minimal tax benefit from
this asset write-down; therefore, the impact on diluted earnings per
share was approximately $0.06 per share after tax. In addition, the
full-year results included a first quarter cash gain of approximately
$0.01 per share resulting from the sale of the Company's ownership interest
in Kaiser in Brazil. Approximately half the gain was recorded in "Other
income (loss) - net," with the remaining portion recorded in "Equity
income."
The reported tax rate for the full year was 27.7 percent. Excluding
the impact of the Kaiser gain and the write-down of investments referred
to above, the effective tax rate on operations was 27 percent for the
full year.
After excluding the benefit of the Kaiser gain and the write down of
investments referred to above, the "Other income (loss) - net"
line of the income statement reflects a $218 million loss for the full
year. The majority of this amount relates to exchange losses from the
remeasurement of balance sheet accounts, primarily in Latin America
and Africa, resulting from the currency devaluations and economic crises.
In addition, the "Other income (loss) - net" balance is negatively
impacted by the accretion of the discounted value of the liability related
to the German bottler control agreement and minority interest.
Balance Sheet -
The balance sheet as of December 31, 2002, as compared to the balance
sheet as of December 31, 2001, was significantly impacted by the Company's
consolidation of its German bottling operation, CCEAG, as of February
2002. Prior to the consolidation, the Company's investment in CCEAG
was accounted for under the equity method. Upon consolidation of CCEAG,
the individual balances were included in the Company's respective balance
sheet line items.
The consolidation of CCEAG was the main component of the following changes
in the Company's balance sheet from December 31, 2001 to December 31,
2002: (1) $716 million decrease in "Equity method investments -
other, principally bottling companies;" (2) $1,458 million increase
in property, plant and equipment; and (3) a $1,299 million increase
in "Other liabilities." The increase in "Trademarks and
other intangible assets" resulted from the consolidation of CCEAG,
partially offset by the implementation of SFAS No. 142, "Goodwill
and Other Intangible Assets," effective January 1, 2002.
The $1,482 million increase in the Company's long-term debt was due
to both the consolidation of CCEAG, which had the effect of increasing
debt by approximately $800 million, of which approximately $750 million
is classified as long-term, and the issuance by the Company during 2002
of $750 million of U.S. dollar notes.
Accounting For Stock-Based Compensation Expense
As previously announced, the Company adopted an accounting policy to
expense the fair value of employee stock-based compensation as outlined
in SFAS No. 123. Based on the transition rules established in SFAS No.
148 - "Accounting for Stock-Based Compensation - Transition and
Disclosure," the Company selected the "modified prospective"
approach to recording stock-based compensation expenses. Under this
approach, the fair value of stock-based compensation is recognized as
an expense effective January 1, 2002. The expense recognized in 2002
for stock-based compensation is the same annual expense that would have
been recognized had the fair value method been applied since the grant
date of the awards. Because this transition method takes effect at the
beginning of 2002, the previously reported quarterly results for 2002
have been restated to reflect the impact of adopting SFAS No. 123. Under
the modified prospective approach, financial results for periods prior
to 2002 are not restated.
The overall impact of adopting the fair value method under SFAS No.
123 was a non-cash adjustment for 2002 of $373 million pre-tax, or $0.11
per share after tax. On a quarterly basis, the pre-tax impact on 2002
results was: first quarter - $95 million, second quarter - $92 million,
third quarter $95 million, fourth quarter - $91 million. There is no
impact on 2001 financial results from the adoption of SFAS No. 123.
The Company expects that the impact of stock-based compensation expense
in 2003 will be approximately $0.13 per share after tax.
Accounting For Goodwill and Other Intangible Assets
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." Under the new rules, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed at
least annually for impairment. Separable intangible assets that do not
have an indefinite life will continue to be amortized over their useful
lives. The amortization provisions of SFAS No. 142 apply to goodwill
and intangible assets acquired after June 30, 2001. With respect to
goodwill and intangible assets acquired prior to July 1, 2001, the Company
began applying the new accounting rules beginning January 1, 2002.
The required adoption of SFAS No. 142 is considered a change in accounting
principle and the cumulative effect of adopting this standard resulted
in a non-cash after-tax charge in the first quarter 2002 of $926 million,
or $0.37 per share. This amount does not affect the Company's on-going
operations and represents intangible assets for both the Company and
its equity affiliates. The adoption of the new accounting standard resulted
in a reduction in 2002 amortization expense of approximately $60 million,
and an increase in equity income of approximately $150 million annually.
Other Pronouncements
EITF No. 01-09, "Accounting for Consideration Given By a Vendor
to a Customer or Reseller of the Vendor's Products," was effective
for the Company beginning January 1, 2002, and it requires certain selling
expenses incurred by the Company to be classified as deductions from
revenue. In 2001, approximately $2.5 billion of payments made to bottlers
and customers that were previously classified as selling, general and
administrative expenses were reclassified to a reduction in net revenues
in accordance with this EITF consensus.
During 2001, the Company implemented SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," and the cumulative
effect of the accounting change was a one-time, non-cash charge of $10
million.
-- Supplemental Schedules Follow --
Supplemental
Schedules
Supplemental
Schedules
The following schedules reflect the
restated quarterly results from the first three quarters of 2002 to
reflect the impact of the adoption of SFAS No. 123 - "Accounting
for Stock-Based Compensation" and SFAS No. 148 - "Accounting
for Stock-Based Compensation - Transition and Disclosure."
| Three
Months Ended March 31, |
|||
| Net Operating Revenues | $ 4,079 | $ 3,959 | 3 |
| Cost of goods sold | 1,394 | 1,345 | 4 |
| Gross Profit |
2,685 | 2,614 | 3 |
expenses (includes $95 $0 in 2001 related to the impact of the adoption of the fair value method of accounting for stock-based compensation) |
1,527 | 1,334 | 14 |