Net Revenues Grew 6%; Organic Revenues (Non-GAAP) Grew 6%

Operating Income Grew 8%; Comparable Currency Neutral Operating Income (Non-GAAP) Grew 14%

Operating Margin Was 29.9%; Comparable Operating Margin (Non-GAAP) Was 30.3%, Including the Impact from Currency Headwinds and Acquisitions

EPS Grew 12% to $0.61; Comparable EPS (Non-GAAP) Grew 4% to $0.63, Despite a 9% Currency Headwind

ATLANTA--(BUSINESS WIRE)-- The Coca-Cola Company today reported strong operating results in the second quarter of 2019, driven by consumer-centric innovation, solid core brand performance and improved execution in the marketplace. Reported net revenues and organic revenues (non-GAAP) both grew 6% through balanced volume and price/mix, with all operating segments contributing to organic revenue (non-GAAP) growth. The company continued to gain global value share. The company’s performance year-to-date led to an update in full year guidance.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190723005449/en/

“Our strategy to transform as a total beverage company has allowed us to continue to win in a growing and vibrant industry,” said James Quincey, chairman and CEO of The Coca-Cola Company. “Our progress is positioning the company to create more value for all of our stakeholders, including our shareowners.”

Highlights

Quarterly Performance

• Revenues: Net revenues grew 6% to $10.0 billion. Organic revenues (non-GAAP) grew 6%. Revenue growth was driven by concentrate sales growth of 4% and price/mix growth of 2%.
• Margin: Operating margin, which included items impacting comparability, was 29.9% versus 29.4% in the prior year. Comparable operating margin (non-GAAP) was 30.3% versus 30.6% in the prior year. Strong underlying operating margin (non-GAAP) expansion was offset by an approximate 185 basis point negative impact from currency headwinds and net acquisitions.
• Earnings per share: EPS grew 12% to $0.61. Comparable EPS (non-GAAP) grew 4% to $0.63. Comparable EPS growth included the impact from a 9-point currency headwind.
• Market share: The company continued to gain value share in total nonalcoholic ready-to-drink (NARTD) beverages.
• Cash flow: Year-to-date cash from operations was $4.5 billion, up 68% largely due to strong underlying growth, working capital initiatives and the timing of tax payments. Year-to-date free cash flow (non-GAAP) was $3.7 billion, up 87%.

Company Updates

• Driving sparkling: Strong performance for the quarter was driven by sparkling soft drinks, led by 4% volume and transaction growth in trademark Coca-Cola. Coca-Cola Zero Sugar continues to perform well, with a seventh consecutive quarter of double-digit volume growth globally. Quarterly performance was further driven by innovation, such as Coca-Cola Plus Coffee, and a modernized marketing strategy for today's consumers. The company reached a first-of-its-kind partnership with Netflix to temporarily bring back 1985’s New Coke for the July 4 debut of season 3 of the hit series "Stranger Things."
• Growing coffee: During the quarter, the company launched the first-ever Costa Coffee ready-to-drink (RTD) chilled product in Great Britain, marking the first major introduction since Coca-Cola acquired Costa earlier this year. The company plans to roll out the product in additional markets in the second half of the year. The brand delivers an authentic coffee taste experience with 30% less sugar than most RTD coffees in Costa’s core market of Great Britain. The Costa Coffee brand is also expanding through a new agreement with Coca-Cola HBC AG. The agreement will address a broad range of consumer and customer needs across multiple channels and occasions, including roast and ground coffee, RTD offerings and vending. The bottler plans to introduce Costa Coffee in at least 10 markets in 2020.
• Expanding energy: The first energy drink under the Coca-Cola brand launched in select European countries during the quarter. Coca-Cola Energy features caffeine from naturally derived sources, guarana extracts, B vitamins and no taurine, all with the great Coca-Cola taste and feeling that people know and love. The product has shown early signs of success. Coca-Cola Energy is now available in 14 countries, including recent launches in Japan, Australia and South Africa. The company expects to offer Coca-Cola Energy in 20 markets by the end of 2019, including Mexico and Brazil.
• Lifting, shifting and scaling: Since the company's initial investment in the innocent business in 2009, the innocent team has taken the business from the #1 smoothie brand in the U.K. to the #1 chilled juice brand across Europe. The brand is now expanding into Asia for the first time through a targeted rollout, starting in Tokyo. Innocent is loved by consumers who want more functional and nutritional benefits in their daily diet, in addition to those who enjoy natural, delicious and healthy juices and smoothies.
• Making progress in packaging: The company continues to make progress on its World Without Waste goals for recycling, recyclable packaging and the use of recycled materials, including these recent milestones:
  • Bottlers worldwide continue to introduce more brands in 100% recycled PET (rPET) packaging. Recent launches include the green tea brand Hajime Ichinichi Ippon in Japan; the Romerquelle and Valser water brands in Austria and Switzerland, respectively; Viva water in the Philippines; and San Luis water in Peru. In Western Europe, 100% rPET bottles will be launched for smartwater, Chaudfontaine and Honest by the end of 2019.
  • Coca-Cola Amatil and Coca-Cola Australia announced that 70% of all PET bottles in the market will be made from 100% rPET by the end of 2019.
  • Coca-Cola European Partners and Coca-Cola Great Britain announced a switch from green to clear bottles for Sprite in their markets as a way to improve recycling. Other markets are making this change as well.
  • Coca-Cola Beverages Philippines, the bottling arm of Coca-Cola in the Philippines, announced that it will lead the investment in a $19 million state-of-the-art, food-grade recycling facility that will collect, sort, clean and wash post-consumer recyclable plastic bottles and turn them into new bottles using advanced technology. It is Coca-Cola’s first major investment in a recycling facility in Southeast Asia.
  • Coca-Cola Vietnam led the launch of an industry-backed packaging recovery organization alongside other companies. The organization will initially focus on increasing recovery and recycling rates for three materials: PET, aluminum and Tetra Pak®.

Tetra Pak® is a U.S. registered trademark of Tetra Laval Holdings & Finance S.A.

Operating Review – Three Months Ended June 28, 2019
Revenues and Volume
Percent Change	Concentrate Sales1	Price/Mix	Currency Impact	Acquisitions, Divestitures and Structural Items, Net	Reported Net Revenues		Organic Revenues2		Unit Case Volume
Consolidated	4	2	(6)	6	6		6		3
Europe, Middle East & Africa	3	1	(10)	3	(4)		4		2
Latin America	4	5	(11)	(1)	(3)		9		1
North America	(1)	4	0	0	3		3		(1)
Asia Pacific	8	(3)	(3)	0	2		5		7
Global Ventures3	5	(3)	(19)	218	201		2		5
Bottling Investments	14	3	(7)	(1)	9		18		30

Operating Income and EPS
Percent Change	Reported Operating Income	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated	8	3	(8)	14
Europe, Middle East & Africa	(5)	0	(14)	9
Latin America	(1)	0	(13)	12
North America	10	6	0	4
Asia Pacific	4	0	(3)	7
Global Ventures	96	0	(4)	100
Bottling Investments	—4	—4	—4	—4
Percent Change	Reported EPS	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated EPS	12	8	(9)

Note: Certain rows may not add due to rounding.
1	For Bottling Investments, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume computed based on total sales (rather than average daily sales) in each of the corresponding periods after considering the impact of structural changes.
2	Organic revenues, comparable currency neutral operating income and comparable currency neutral EPS are non-GAAP financial measures. Refer to the Reconciliation of GAAP and Non-GAAP Financial Measures section.
3	With the exception of RTD products, Costa sales are not included in concentrate sales, price/mix or unit case volume.
4	Reported operating income for the three months ended June 28, 2019 was $119 million. Reported operating loss for the three months ended June 29, 2018 was $17 million. Therefore, the percentages are not calculable.

In addition to the data in the preceding tables, operating results in the quarter included the following:

Consolidated

• Price/mix grew 2% for the quarter through solid pricing in the marketplace across all operating segments. Concentrate sales growth of 4% was ahead of unit case volume growth primarily due to the timing of shipments in Brazil.
• Unit case volume grew 3%, driven by strong growth in developing and emerging markets. Category cluster performance was as follows:
  • Sparkling soft drinks grew 3%, driven by strong 4% global growth in trademark Coca-Cola, including growth in original Coca-Cola and continued double-digit growth in Coca-Cola Zero Sugar.
  • Juice, dairy and plant-based beverages volume was even as strong performance in the Maaza brand in India and the innocent business across Europe was offset by a decline in Rani, the leading juice brand in the Middle East.
  • Water, enhanced water and sports drinks grew 2%, led by the Ciel and Cristal brands in Mexico as well as the Kinley brand in India, partially offset by a decline in the company's water brands in Japan. The decline in Japan was primarily due to deprioritization of low-margin commodity water brands.
  • Tea and coffee volume declined 3% as growth in Fuze Tea across Europe and Mexico was offset by a decline in the doğadan tea business in Turkey, in addition to the company's tea brands in Japan.
• Operating income grew 8% including a negative impact from currency. Comparable currency neutral operating income (non-GAAP) grew 14%. Operating income growth was driven by strong organic revenue (non-GAAP) growth, a benefit from acquisitions and ongoing productivity initiatives.

Europe, Middle East & Africa

• Price/mix grew 1% for the quarter, which included a 2-point headwind from geographic mix due to strong growth across key African markets, including South Africa and Nigeria.
• Unit case volume grew 2%, as growth across the majority of markets was partially offset by declines in Zimbabwe and the Middle East. Growth was led by sparkling soft drinks and Fuze Tea.
• Operating income declined 5%, primarily due to a 14-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 9%, primarily driven by organic revenue (non-GAAP) growth in addition to a benefit from the timing of expenses.
• The company gained value share in total NARTD beverages, led by solid share performance across Europe, in addition to gaining share across all category clusters.

Latin America

• Price/mix grew 5% for the quarter, largely driven by strong performance in Mexico and Brazil, in addition to inflationary pricing in Argentina.
• Unit case volume grew 1% as growth across the majority of key markets, led by Brazil and Mexico, was partially offset by a decline in Argentina.
• Operating income declined 1%, which included a 13-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 12%. Operating income growth was largely driven by the benefit of strong pricing in the marketplace.
• The company lost value share in total NARTD beverages as a gain in sparkling soft drinks was offset by a loss in packaged water.

North America

• Price/mix grew 4% for the quarter, driven by sparkling soft drinks.
• Unit case volume declined 1% partially due to the impact of pricing and package initiatives executed in the marketplace, which is driving positive price/mix performance. Positive performance in trademark Coca-Cola was driven by double-digit growth in Coca-Cola Zero Sugar and innovation such as Coca-Cola Orange Vanilla.
• Operating income grew 10%. Comparable currency neutral operating income (non-GAAP) grew 4%. Growth was largely driven by favorable product mix, with sparkling soft drinks as the main driver.
• The company gained value share in total NARTD beverages led by strong performance in sparkling soft drinks; water, enhanced water and sports drinks; and juice, dairy and plant-based beverages.

Asia Pacific

• Price/mix declined 3% for the quarter, largely driven by geographic mix due to growth in emerging and developing markets outpacing developed markets.
• Unit case volume grew 7% due to broad-based growth across nearly all key markets. Volume growth was led by India, Southeast Asia and China.
• Operating income grew 4%. Comparable currency neutral operating income (non-GAAP) grew 7%. Operating income growth was primarily driven by organic revenue (non-GAAP) growth and a benefit from the timing of expenses.
• The company gained value share in total NARTD beverages, driven by strong performance in China and Southeast Asia.

Global Ventures

• Reported net revenues benefited from the Costa acquisition.
• Price/mix declined 3%, largely driven by innocent product mix as growth in juices outpaced smoothies, in addition to cycling strong 8% price/mix growth in the prior year.
• Unit case volume grew 5% as strong growth in innocent and the energy category was partially offset by a decline in the doğadan tea business in Turkey.
• Operating income growth benefited from the Costa acquisition.

Bottling Investments

• During the quarter, the company announced that it will maintain its majority stake in Coca-Cola Beverages Africa (CCBA) for the foreseeable future. As a result, CCBA is now presented within the company’s results from continuing operations and is included in the Bottling Investments operating segment.
• Price/mix grew 3% for the quarter, largely driven by solid performance from CCBA and the company's bottling operations in India.
• Operating income was favorably impacted by comparability items and the acquisition of bottling operations in the Philippines.

Operating Review – Six Months Ended June 28, 2019
Revenues and Volume
Percent Change	Concentrate Sales1	Price/Mix	Currency Impact	Acquisitions, Divestitures and Structural Items, Net	Reported Net Revenues		Organic Revenues2		Unit Case Volume
Consolidated	3	3	(6)	6	5		6		2
Europe, Middle East & Africa	4	5	(11)	3	0		9		2
Latin America	0	7	(13)	0	(6)		7		0
North America	(2)	4	0	0	2		2		(1)
Asia Pacific	7	(2)	(3)	(1)	0		4		7
Global Ventures3	1	0	(20)	220	201		1		3
Bottling Investments	9	3	(8)	(2)	3		13		23

Operating Income and EPS
Percent Change	Reported Operating Income	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated	15	11	(9)	14
Europe, Middle East & Africa	0	0	(14)	15
Latin America	(7)	0	(16)	9
North America	13	7	0	6
Asia Pacific	1	0	(3)	3
Global Ventures	110	0	(6)	116
Bottling Investments	—4	—4	64	372
Percent Change	Reported EPS	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated	16	13	(9)	13

Note: Certain rows may not add due to rounding.
1	For Bottling Investments, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume computed based on total sales (rather than average daily sales) in each of the corresponding periods after considering the impact of structural changes.
2	Organic revenues, comparable currency neutral operating income and comparable currency neutral EPS are non-GAAP financial measures. Refer to the Reconciliation of GAAP and Non-GAAP Financial Measures section.
3	With the exception of RTD products, Costa sales are not included in concentrate sales, price/mix or unit case volume.
4	Reported operating income for the six months ended June 28, 2019 was $219 million. Reported operating loss for the six months ended June 29, 2018 was $342 million. Therefore, the percentages are not calculable.

Outlook

The 2019 outlook information provided below includes forward-looking non-GAAP financial measures, which management uses in measuring performance. The company is not able to reconcile full year 2019 projected organic revenues (non-GAAP) to full year 2019 projected reported net revenues, full year 2019 projected comparable currency neutral net revenues (non-GAAP) to full year 2019 projected reported net revenues, full year 2019 projected comparable currency neutral operating income (non-GAAP) to full year 2019 projected reported operating income, or full year 2019 projected comparable EPS (non-GAAP) to full year 2019 projected reported EPS without unreasonable efforts because it is not possible to predict with a reasonable degree of certainty the actual impact of changes in foreign currency exchange rates; the exact timing and amount of acquisitions, divestitures and/or structural changes; and the exact timing and amount of comparability items throughout 2019. The unavailable information could have a significant impact on full year 2019 GAAP financial results.

Full Year 2019 Revenues:

• 5% growth in organic revenues (non-GAAP) – Updated
• 12% growth in comparable currency neutral net revenues (non-GAAP), including a 7% tailwind from acquisitions, divestitures and structural items – Updated
• Comparable net revenues (non-GAAP): 4% currency headwind based on the current rates and including the impact of hedged positions – Updated

Full Year 2019 Operating Income:

• 11% to 12% growth in comparable currency neutral operating income (non-GAAP), including a low single-digit tailwind from acquisitions, divestitures and structural items – Updated
• Comparable operating income (non-GAAP): 7% to 8% currency headwind based on the current rates and including the impact of hedged positions – Updated

Full Year 2019 EPS:

• -1% to 1% growth versus $2.08 in 2018 in comparable EPS (non-GAAP) – No Change

Full Year 2019 Other Items:

• Underlying effective tax rate (non-GAAP): Estimated to be 19.5% – No Change
• Cash from operations: At least $8.5 billion – Updated
• Capital expenditures: Approximately $2.4 billion – Updated
• Net share repurchases (non-GAAP): Share repurchases to offset dilution from employee stock-based compensation plans – No Change

Third Quarter 2019 Considerations – New:

• Comparable net revenues (non-GAAP): 6% tailwind from acquisitions, divestitures and structural items; 3% currency headwind based on the current rates and including the impact of hedged positions
• Comparable operating income (non-GAAP): 6% currency headwind based on the current rates and including the impact of hedged positions

Notes

• All references to growth rate percentages and share compare the results of the period to those of the prior year comparable period.
• All references to volume and volume percentage changes indicate unit case volume, unless otherwise noted. All volume percentage changes are computed based on average daily sales, unless otherwise noted. "Unit case" means a unit of measurement equal to 24 eight-ounce servings of finished beverage. "Unit case volume" means the number of unit cases (or unit case equivalents) of company beverages directly or indirectly sold by the company and its bottling partners to customers.
• "Concentrate sales" represents the amount of concentrates, syrups, beverage bases, source waters and powders/minerals (in all instances expressed in equivalent unit cases) sold by, or used in finished beverages sold by, the company to its bottling partners or other customers. In the reconciliation of reported net revenues, "concentrate sales" represents the percent change in net revenues attributable to the increase (decrease) in concentrate sales volume for the geographic operating segments and the Global Ventures operating segment (excluding Costa non-RTD sales) (expressed in equivalent unit cases) after considering the impact of structural changes. For the Bottling Investments operating segment, this represents the percent change in net revenues attributable to the increase (decrease) in unit case volume computed based on total sales (rather than average daily sales) in each of the corresponding periods after considering the impact of structural changes. The Bottling Investments operating segment reflects unit case volume growth for consolidated bottlers only.
• "Price/mix" represents the change in net operating revenues caused by factors such as price changes, the mix of products and packages sold, and the mix of channels and geographic territories where the sales occurred.
• First quarter 2019 financial results were impacted by one less day as compared to the same period in 2018, and fourth quarter 2019 financial results will be impacted by one additional day as compared to the same period in 2018. Unit case volume results for the quarters are not impacted by the variances in days due to the average daily sales computation referenced above.

Conference Call

The company is hosting a conference call with investors and analysts to discuss second quarter 2019 operating results today, July 23, 2019, at 8:30 a.m. ET. The company invites participants to listen to a live webcast of the conference call on the company’s website, http://www.coca-colacompany.com, in the "Investors" section. An audio replay in downloadable digital format and a transcript of the call will be available on the website within 24 hours following the call. Further, the "Investors" section of the website includes certain supplemental information and a reconciliation of non-GAAP financial measures to the company’s results as reported under GAAP which may be used during the call when discussing financial results.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190723005449/en/

Investors and Analysts: Tim Leveridge, [email protected]

Media: Scott Leith, [email protected]

Source: The Coca-Cola Company

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