Net Revenues Grew 8%; Organic Revenues (Non-GAAP) Grew 5%

Operating Income Declined 4%; Comparable Currency Neutral Operating Income (Non-GAAP) Grew 5%

Operating Margin Was 26.3%; Comparable Operating Margin (Non-GAAP) Was 28.1%; Margins Were Negatively Impacted by Currency Headwinds and Acquisitions

EPS Grew 37% to $0.60; Comparable EPS (Non-GAAP) Declined 2% to $0.56, Impacted by a 6% Currency Headwind

ATLANTA--(BUSINESS WIRE)-- The Coca-Cola Company continued to execute on its key strategies in the third quarter, with strong revenue growth and value share gains globally. Reported net revenues grew 8% and organic revenues (non-GAAP) grew 5%, driven by innovation, revenue growth management and improving execution. The company’s performance year-to-date has led to an update in full year guidance.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20191018005175/en/

"Our performance gives us confidence that our strategies are taking hold with our consumers, customers and system," said James Quincey, chairman and CEO of The Coca-Cola Company. "We are positioning the company to create a better shared future for all of our stakeholders by delivering on our vision and growing sustainably."

Highlights

Quarterly Performance

• Revenues: Net revenues grew 8% to $9.5 billion. Organic revenues (non-GAAP) grew 5%. Revenue growth was driven by price/mix growth of 6%, partially offset by a 2% decline in concentrate sales.
• Margin: Operating margin, which included items impacting comparability, was 26.3% versus 29.8% in the prior year. Comparable operating margin (non-GAAP) was 28.1% versus 30.7% in the prior year. Margins were unfavorably impacted by a 260 basis point headwind from currency and net acquisitions.
• Earnings per share: EPS grew 37% to $0.60. Comparable EPS (non-GAAP) declined 2% to $0.56. Comparable EPS performance included the impact from a 6-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 $7.8 billion, up 37% largely due to strong underlying growth, working capital initiatives and the timing of tax payments. Year-to-date free cash flow (non-GAAP) was $6.6 billion, up 41%.

Company Updates

• Executing the revenue growth algorithm: The company continues to capitalize on opportunities for growth through expanded revenue growth management capabilities and improved execution. Key initiatives include increasing availability and distribution of priority SKUs. In Brazil, for example, expansion of priority package offerings at key price points, along with placing more than 100,000 incremental coolers in the marketplace, has led to double-digit transaction growth of immediate consumption priority packages year-to-date. Globally, growth in immediate consumption packages outpaced future consumption by 6 points during the quarter.
• Expanding headroom for growth in sparkling beverages: Globally, trademark Coca-Cola has grown retail value 6% year-to-date through an accelerated pace of innovation and optimizing price/pack architecture in the marketplace. The largest contributor to retail value growth was the flagship U.S. market, driven by continued double-digit volume growth in Coca-Cola Zero Sugar, in addition to strong growth in smaller packages, led by double-digit growth in 7.5-oz. mini cans. Internationally, a scaled launch of Coca-Cola Plus Coffee in more than 20 markets with a diligent consumer focus, consistent messaging and an integrated execution plan has driven strong performance year-to-date. Accelerated revenue growth for core sparkling soft drink brands continues to fuel and enable new innovations and investments across the expanding total beverage portfolio.
• Disciplined portfolio growth of premium brands: During the year, the company leveraged the leader, challenger, explorer framework to successfully grow smartwater in India, where it has become the second-largest premium water brand in the market since its initial launch in 2018. In the explorer and challenger phase, the company leveraged local celebrity endorsements and digital marketing to drive brand edge while expanding distribution in select channels as a premium offering. India is now the fourth-largest market globally for the smartwater brand, with a target to be in 90,000 outlets by the end of 2019.
• Expanding innovation through Coca-Cola Energy: The company recently announced plans to bring new fans into the energy drink category next year with the U.S. launch of Coca-Cola Energy. Coca-Cola Energy and Coca-Cola Energy Cherry – a flavor available exclusively in the United States – and their zero-calorie counterparts will be available nationwide in 12-oz. sleek cans starting in January 2020. The rollout supports ongoing efforts to deliver more beverage options that meet changing preferences, lifestyles and tastes. It’s also an example of the company’s commitment to move quickly, bring more drinks to the shelf, and "lift and shift" innovations around the world. Coca-Cola Energy debuted earlier this year in Spain and Hungary and is currently available in more than 25 countries.
• Growing sustainably through package innovation: During the quarter, the company made solid progress on its World Without Waste goals. In the United States, the company announced the goal of removing the equivalent of at least 1 billion virgin PET plastic bottles from its supply chain over the next five years. Dasani, America’s leading mainstream bottled water brand, will roll out a next-generation lineup of recyclable, reusable and package-free options – anchored by the first-ever HybridBottle™, which is made with a mix of up to 50% plant-based, renewable material and recycled PET. The company also announced the expansion of up to 100 Dasani PureFill™ water dispensers leveraging Coca-Cola Freestyle™ technology in late 2019. Globally, the company now has seven markets where its local water brand is packaged in 100% recycled PET. The company also continues to lightweight its packaging to reduce the amount of virgin PET plastic sourced by the Coca-Cola system.

Operating Review – Three Months Ended September 27, 2019

Revenues and Volume
Percent Change	Concentrate Sales1	Price/Mix	Currency Impact	Acquisitions, Divestitures and Structural Changes, Net	Reported Net Revenues		Organic Revenues2		Unit Case Volume
Consolidated	(2)	6	(3)	6	8		5		2
Europe, Middle East & Africa	1	3	(7)	3	0		4		1
Latin America	(8)	20	(8)	0	4		12		1
North America	(1)	3	0	(1)	2		3		1
Asia Pacific	3	0	1	0	3		3		4
Global Ventures3	17	(3)	(14)	243	243		14		15
Bottling Investments	7	2	(3)	2	8		9		24

Operating Income and EPS
Percent Change	Reported Operating Income	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated	(4)	(3)	(7)	5
Europe, Middle East & Africa	(5)	0	(11)	7
Latin America	(6)	0	(11)	5
North America	(3)	(3)	0	0
Asia Pacific	(3)	(7)	1	3
Global Ventures	75	0	(4)	79
Bottling Investments	(70)	—4	—4	—4
Percent Change	Reported EPS	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated EPS	37	39	(6)	4
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 ready-to-drink (RTD) products, Costa sales are not included in concentrate sales, price/mix or unit case volume.
4 Comparable operating income (non-GAAP) for the three months ended September 27, 2019 was $30 million. Comparable operating loss (non-GAAP) for the three months ended September 28, 2018 was $14 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 6% for the quarter through revenue growth management initiatives and a benefit from geographic mix. Concentrate sales were 4 points behind unit case volume growth due to the timing of shipments during the quarter, in addition to cycling the timing of shipments in Brazil in the prior year.
• Unit case volume grew 2%, primarily driven by strong growth in developing and emerging markets in addition to solid growth in North America. Category cluster performance was as follows:
  • Sparkling soft drinks grew 2%, driven by strong 3% global growth in trademark Coca-Cola, including continued double-digit growth in Coca-Cola Zero Sugar.
  • Juice, dairy and plant-based beverages grew 1%, led by strong performance within the Minute Maid and Simply portfolio in North America in addition to strong growth in Minute Maid Pulpy in China, partially 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 Latin America and strong growth in Dasani internationally as well as Kinley in India, partially offset by the deprioritization of low-margin commodity water in China.
  • Tea and coffee volume grew 4%, led by strong performance across the company's portfolio in Japan, in addition to the doğadan tea business in Turkey and Gold Peak tea in North America.
• Operating income declined 4%, including a negative impact from currency. Comparable currency neutral operating income (non-GAAP) grew 5%. Operating income was negatively impacted by cycling the timing of concentrate shipments and expenses in the prior year, in addition to the timing of certain items in the current year, including marketing investments.

Europe, Middle East & Africa

• Price/mix grew 3% for the quarter through positive performance across the majority of key markets.
• Unit case volume grew 1%, as strong growth across West and South Africa was partially offset by a decline in Europe, which was impacted by cycling strong performance in the prior year.
• Operating income declined 5%, primarily due to an 11-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 7%, primarily driven by favorable product mix.
• The company gained value share in total NARTD beverages, led by solid share performance across Europe, partially offset by a value share decline in Nigeria, primarily due to local value brands.

Latin America

• Price/mix grew 20% for the quarter, through strong pricing and package initiatives in the marketplace, in addition to a benefit from cycling the timing of deductions in the prior year.
• Unit case volume grew 1%, as growth across the majority of markets, led by Brazil and Mexico, was partially offset by a decline in Argentina. Volume growth benefited from acquired brands in Central America.
• Operating income declined 6%, which included an 11-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 5%. Operating income was impacted by cycling the timing of concentrate shipments in Brazil in the prior year.
• The company gained value share in total NARTD beverages, led by solid share performance in Brazil.

North America

• Price/mix grew 3% for the quarter, driven by solid performance across the majority of category clusters.
• Unit case volume grew 1%, led by strong performance in sparkling soft drinks under trademark Coca-Cola and Sprite. All category clusters grew volume during the quarter, with the exception of tea and coffee, which was even.
• Operating income declined 3%, which included the impact of comparability items. Comparable currency neutral operating income (non-GAAP) was even. Operating income was negatively impacted by cycling the benefit of intercompany profit elimination in the prior year related to the refranchising of North American bottling operations, as well as cycling the timing of expenses in the prior year.
• 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 was even for the quarter, negatively impacted by 4 points of geographic mix due to growth in emerging and developing markets outpacing developed markets.
• Unit case volume grew 4%, due to broad-based growth across the majority of key markets, partially offset by a decline in Japan. Volume growth was led by Southeast Asia, China and India.
• Operating income declined 3%, which included the impact of comparability items. Comparable currency neutral operating income (non-GAAP) grew 3%. Operating income was negatively impacted by geographic mix.
• 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 unfavorable product mix as a result of strong growth in the doğadan tea business.
• Unit case volume grew 15%, led by the doğadan tea business in Turkey, in addition to strong growth in Monster and innocent.
• Operating income growth benefited from the Costa acquisition.

Bottling Investments

• Price/mix grew 2% for the quarter, largely driven by solid performance from the company's bottling operations in India.
• Operating income was driven by strong revenue growth, partially offset by the impact of comparability items and currency headwinds.

Operating Review – Nine Months Ended September 27, 2019

Revenues and Volume
Percent Change	Concentrate Sales1	Price/Mix	Currency Impact	Acquisitions, Divestitures and Structural Changes, Net	Reported Net Revenues		Organic Revenues2		Unit Case Volume
Consolidated	1	4	(5)	6	6		6		2
Europe, Middle East & Africa	3	4	(10)	3	0		7		2
Latin America	(2)	11	(11)	0	(3)		9		0
North America	(2)	4	0	0	2		2		0
Asia Pacific	5	(2)	(2)	(1)	1		4		6
Global Ventures3	7	(1)	(18)	227	214		5		7
Bottling Investments	9	3	(6)	(1)	4		11		23

Operating Income and EPS
Percent Change	Reported Operating Income	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated	8	6	(8)	11
Europe, Middle East & Africa	(1)	0	(13)	12
Latin America	(7)	0	(15)	8
North America	7	3	0	4
Asia Pacific	(1)	(2)	(1)	3
Global Ventures	96	0	(5)	101
Bottling Investments	—4	—4	35	2,225
Percent Change	Reported EPS	Items Impacting Comparability	Currency Impact	Comparable Currency Neutral2
Consolidated	23	22	(8)	10
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 nine months ended September 27, 2019 was $226 million. Reported operating loss for the nine months ended September 28, 2018 was $318 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:

• At least 5% growth in organic revenues (non-GAAP) – Updated
• At least 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% to 5% currency headwind based on the current rates and including the impact of hedged positions – Updated

Full Year 2019 Operating Income:

• 12% to 13% 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): 8% to 9% 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 $8.8 billion – Updated
• Capital expenditures: Approximately $2.2 billion – Updated
• Net share repurchases (non-GAAP): Expect share repurchases to offset dilution from employee stock-based compensation plans – No Change

Fourth Quarter 2019 Considerations – New:

• Comparable net revenues (non-GAAP): 12% 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): 7% currency headwind based on the current rates and including the impact of hedged positions

Full Year 2020 Considerations – New:

• Comparable net revenues (non-GAAP): 1% to 2% currency headwind based on the current rates and including the impact of hedged positions
• Comparable operating income (non-GAAP): 2% to 3% 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 third quarter 2019 operating results today, Oct. 18, 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/20191018005175/en/

Investors and Analysts: Tim Leveridge, [email protected]

Media: Scott Leith, [email protected]

Source: The Coca-Cola Company

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