1. No category

First Quarter 2015
Earnings Call
April 22, 2015
Forward-Looking Statements
This presentation may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words
“believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature.
Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Coca-Cola Company’s historical experience and
our present expectations or projections. These risks include, but are not limited to, obesity concerns; water scarcity and poor quality; evolving consumer preferences; increased
competition and capabilities in the marketplace; product safety and quality concerns; perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners
and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials; increased demand for food products and decreased
agricultural productivity; changes in the retail landscape or the loss of key retail or foodservice customers; an inability to expand operations in emerging and developing markets;
fluctuations in foreign currency exchange rates; interest rate increases; an inability to maintain good relationships with our bottling partners; a deterioration in our bottling partners'
financial condition; increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters; increased or new indirect taxes in the United States or in other
major markets; increased cost, disruption of supply or shortage of energy or fuels; increased cost, disruption of supply or shortage of ingredients, other raw materials or packaging
materials; changes in laws and regulations relating to beverage containers and packaging; significant additional labeling or warning requirements or limitations on the availability of
our products; an inability to protect our information systems against service interruption, misappropriation of data or breaches of security; unfavorable general economic conditions
in the United States; unfavorable economic and political conditions in international markets; litigation or legal proceedings; adverse weather conditions; climate change; damage to
our brand image and corporate reputation from negative publicity, even if unwarranted, related to product safety or quality, human and workplace rights, obesity or other issues;
changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations; changes in accounting standards; an inability to achieve our
overall long-term growth objectives; deterioration of global credit market conditions; default by or failure of one or more of our counterparty financial institutions; an inability to
timely implement our previously announced actions to reinvigorate growth, or to realize the economic benefits we anticipate from these actions; failure to realize a significant portion
of the anticipated benefits of our strategic relationships with Keurig Green Mountain, Inc. and Monster Beverage Corporation; an inability to renew collective bargaining agreements
on satisfactory terms, or we or our bottling partners experience strikes, work stoppages or labor unrest; future impairment charges; multi-employer plan withdrawal liabilities in the
future; an inability to successfully integrate and manage our Company-owned or -controlled bottling operations; an inability to successfully manage the possible negative
consequences of our productivity initiatives; global or regional catastrophic events; and other risks discussed in our Company’s filings with the Securities and Exchange Commission
(SEC), including our Annual Report on Form 10-K for the year ended December 31, 2014, which filings are available from the SEC. You should not place undue reliance on forwardlooking statements, which speak only as of the date they are made. The Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.
Reconciliation to U.S. GAAP Financial Information
The following presentation may include certain "non-GAAP financial measures" as defined in Regulation G under the Securities Exchange Act of 1934. A schedule is posted on
the Company's website at www.coca-colacompany.com (in the “Investors” section) which reconciles our results as reported under Generally Accepted Accounting Principles and
the non-GAAP financial measures included in the following presentation.
2
Topics
Q1 2015 Review
Strategic Actions and Progress
2015 Expectations
Financial Review
Summary
3 3
We are pleased with our first quarter results
Winning Metrics:
Q1 vs PY
Value Share
- Sparkling
- Still
- NARTD
Growth/Profit Metrics:
Unit Cases (calculated on average daily sales basis)
1%
Organic Revenue*
- Volume (Concentrate Sales / Reported Volume)
- Price/Mix
8%
5%
3%
Income Before Taxes**
13%
Cash/Returns Metrics:
Free Cash Flow*** (YTD)
4
Q1 Growth
Absolute
Change
$1.1B
72%
* Organic revenue is a non-GAAP financial measure that excludes or otherwise adjusts for the impact of changes in foreign currency exchange rates and
acquisitions and divestitures, as applicable. For details on these adjustments, refer to the Reconciliation of GAAP and Non-GAAP Financial Measures schedule
**Comparable Currency Neutral, Structurally Adjusted
***Free Cash Flow = Cash from Operations less Purchases of Property, Plant & Equipment
We are making progress against our five strategic actions
5
1
Make disciplined brand and growth investments
2
Aggressively expand our productivity program
3
Streamline and simplify our operating model
4
Drive revenue and profit growth with clear portfolio roles across our markets
5
Refocus on our core business model
Disciplined brand and growth investments
Coca-Cola Chinese New Year
marketing campaign
Objectives
1. Recruit during Chinese New
Year
2. Build a Chinese New Year
Coca-Cola asset that is
proprietary and long term
3. Jump start the year to build
sparkling momentum for
the rest of the year
6
Concept
Results
+9%
Brand Coca-Cola
Volume Growth
Productivity efforts are on track across all spend areas
2015
Focus
• Changes made during 2014 are now
accounted for in our budgets and tied
to our objectives
• Streamlining initiatives underway
• We are now working through the
rewiring of business processes within
the organization
On Track
• Connecting corporate R&D efforts
directly to global development centers
and business units around the world
• Scale innovation efforts, share
developments faster, and accelerate
new product development
7
Leveraging our networked marketing model for greater efficiency and
effectiveness
CELEBRATE A BIRTHDAY…
8
…LEVERAGE IT FOR GROWTH
Driving profitable revenue growth based on segmented market role
North
America
Creating value for customers
through differentiated consumer
proposition
Driving trial and recruitment
• Generating revenue through a greater
reliance on price realization, driven by
increased media investments
• Revenue growth strategies focus on
expanding distribution and recruiting
new consumers
• Sparkling price/mix +3% with
transactions +1%
• Double-digit unit case volume growth
in both sparkling and still portfolios
• More consumers are enjoying our
products more often, and are
increasingly choosing smaller package
sizes, including our iconic contour
bottle
9
India
North America refranchising is ahead of plan for 2015
Actions
Map
• Transferred four territories in Q1
• Ahead of schedule to transfer
Chicago and Central Florida in Q2,
representing ~5% of bottle/can
volume
• Signed Letters of Intent for over 5%
of bottle/can volume
• In total, territories transitioned todate or covered by agreements
represent >15% of total U.S.
bottle/can volume
10
Coca-Cola Refreshments Territories
Independent Bottlers (Legacy Territories)
CCR Transitioned Territories
CCR Territories under DA/LOI
Territory boundaries are approximate/illustrative.
All transactions subject to both parties reaching Definitive Agreement.
Total U.S. Bottler Delivered Business for Coca-Cola brands, bottle/can distribution only (Excludes FoodService). Volume in unit cases.
We are maintaining our full-year underlying currency neutral growth
expectations
• Solid first quarter benefited from six additional days
• Initial progress is encouraging
• However, global consumer environment remains volatile
• We are on track to deliver against our full-year currency
neutral EPS target of mid single-digit growth
• 2015 remains a transition year for the Company
11
Financial Review
• Q1 EPS considerations
–
Positive pricing and product mix across many of our markets as well as positive geographic mix drove global 3%
price/mix
–
Comparable gross margin expanded by 75 basis points
–
Direct marketing expenditures grew double digits
–
Comparable currency neutral income before taxes grew 13%. The combined impact of structural items and the
provision in Venezuela resulted in a 3 point headwind on income before taxes
–
Foreign exchange gains associated with the euro-denominated debt issued during the quarter benefited results
• Venezuela
–
The SIMADI floating exchange rate will now be used to translate our Venezuelan subsidiary’s local currency
income statement into U.S. dollars
• Healthy cash flow generation
12
–
We generated $1.1 billion in free cash flow
–
We returned $1.8 billion to shareowners in the form of dividends and net share repurchases
–
Annual dividend increased 8% to $1.32 per share
–
We have increased our dividend every year for more than a half century
Full Year 2015 Outlook
Structural Items
• Timing of North America refranchising and Monster transaction shifted slightly
• Structural items now expected to be slight headwind on net revenues
• No material change to impact at income before taxes
13
Currency
•
EPS
• We continue to expect mid single-digit comparable currency neutral EPS growth
~6%
headwind on net revenues, ~10% headwind on operating income and ~7%
headwind on income before taxes
Second Quarter 2015 Considerations
Organic Topline
• Benefit from Easter sell-in shifted into Q1 this year as compared to Q2 last year
Structural Items
• North America territories representing ~5% annualized bottle/can volume expected to
transfer in Q2
• Monster transaction now expected to close mid to late second quarter but U.S. distribution
began transferring to KO system in April
• Neutral impact on net revenues and 1 to 2 point headwind on income before taxes
Currency
14
•
~7%
headwind on net revenues, ~10% headwind on operating income and 5% to 6%
headwind on income before tax
Summary
• First quarter performance was driven by solid
pricing, Easter sell-in and the benefit of six additional
days
• We are encouraged by our progress but 2015
remains a transition year as we implement
significant change in our Company
• We are best positioned to capture growth in
nonalcoholic beverages and deliver long-term value
15
Q&A