The Coca-Cola Company Media Relations Department
P.O. Box 1734, Atlanta, Georgia 30301
Telephone (404) 676-2121
NEWS
RELEASE
FOR IMMEDIATE RELEASE
CONTACT: Media: Kari Bjorhus
(404) 676-2683
Investors: Larry M. Mark
(404) 676-8054
THE COCA-COLA COMPANY ANNOUNCES SOLID
-------------------------------------
FOURTH QUARTER AND FULL YEAR 2002 RESULTS
-----------------------------------------
* Worldwide unit case volume grew 6 percent in the fourth quarter and 5
percent for the full year.
* Company generated record operating income during the year and record
cash flow from operations of $4.7 billion, up 15 percent from prior
year.
* Company adopted the "modified prospective" approach to expensing
stock-based compensation, resulting in a full-year 2002 financial
impact of $0.11 per share, effective from January 1, 2002. No impact
on 2001 or prior financial results from the adoption.
* Reported earnings per share were $1.23 for the year after a reduction
of $0.54 resulting from the adoption of SFAS No. 142 (goodwill and
other intangible assets), SFAS No. 123 (stock-based compensation), and
several charges/gains in Latin America.
* Reported fourth quarter earnings per share were $0.38 after a
reduction of $0.02 related to the accounting change for stock-based
compensation.
ATLANTA, Feb. 12, 2003 - The Coca-Cola Company reported fourth quarter
earnings per share of $0.38 and full-year earnings per share of $1.23. Fourth
quarter results include a $0.02 per share expense related to the impact of
-more-
Page 2
the adoption of the fair value method of accounting for stock-based
compensation. Full-year results also reflect the impact of the adoption of the
fair value method, as well as the adoption of SFAS No. 142 - "Goodwill and Other
Intangible Assets," and other charges/gains. The total net reductions of 2002
reported earnings of $0.54 per share are detailed in a table under "Financial
Highlights."
Cash from operations for the year was a record $4.7 billion, compared to
$4.1 billion in the prior year, a 15 percent increase. After investing
activities (primarily capital expenditures and acquisitions), the Company
generated $3.6 billion of cash flow in 2002, a 22 percent increase over 2001,
and expects strong cash flows to continue in the future.
Worldwide unit case volume increased 6 percent in the fourth quarter and 5
percent for the year, growing nearly 950 million incremental unit cases in 2002
to a record 18.7 billion unit cases. Unit case volume benefited from the recent
strategic acquisitions and license agreements on brands such as Evian, Danone
waters and Seagram's Mixers. If the unit case volume associated with the brands
acquired during 2002 were excluded, the fourth quarter unit case growth rate
would have been 4 percent and the full-year unit case growth rate would have
been 4-1/2 percent.
Doug Daft, chairman and chief executive officer, said "Over the past year,
The Coca-Cola Company made considerable progress by delivering strong financial
results, growing its brands, strengthening bottler relationships, and enhancing
its corporate governance practices. In 2002, we began expensing stock options
for the first time, resulting in an additional $373 million of expenses in our
financial results. Even after considering this, we generated operating income at
the highest levels in our Company's history.
"Throughout the year, we outpaced the rest of the industry in each of the
major beverage categories. We grew our carbonated soft drinks by 2 percent
during the year and noncarbonated beverages by 28 percent. In the juices and
juice drinks category, our growth of 21 percent was well ahead of the industry's
4 percent growth. Across 70 countries, Powerade grew 25 percent and was ahead of
the industry average, while our water business grew by 68 percent, well above
the global industry's 8 percent rate.
-more-
Page 3
"Overall, we were pleased with our results in 2002 in the face of a
difficult macroeconomic environment, and we are confident about how we will
execute in 2003."
FINANCIAL HIGHLIGHTS
- --------------------
* Operating income for the year was $5.5 billion, which included $373 million
in expenses related to the impact of the adoption of SFAS No. 123
(stock-based compensation expense).
* Full-year reported results were $1.23 per share and included the impact of
accounting changes and several other items. The effect of these items on
earnings per share and the Company's financial results is summarized as
follows:
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
2002 2002 2002 2002 2002
------- ------- ------- ------- ----
Income (Expense) Per Share
ACCOUNTING CHANGES:
Cumulative Effect of
Adopting SFAS 142 -
(Goodwill and Intangible
Assets) ($ 0.37) ($ 0.37)
Change in Accounting
Principle - Adoption of
SFAS 123 (Stock-Based
Compensation Expense) ($ 0.03) ($ 0.03) ($ 0.03) ($ 0.02*) ($ 0.11)
OTHER ITEMS:
Gain on Sale of Kaiser $ 0.01 $ 0.01
Non-Cash Charge -
Primarily Related to
Investments in Latin
America ($ 0.06) ($ 0.06)
Charge by Latin American
Equity Investees ($ 0.01) ($ 0.01)
--------
($ 0.54)
=======
<FN>
*Reflects rounding to ensure the sum of quarterly per share amounts equals
full year actual amount.
</FN>
* Currency negatively impacted earnings per share for the year by approximately
$0.08, or 5 percent. Based on current estimates, currencies are expected to
have a neutral to slightly positive impact on earnings per share in 2003.
-more-
Page 4
* The Company repurchased approximately $700 million of common stock during
2002 and intends to accelerate its share repurchase program in 2003.
* The Company increased its dividend 11 percent in 2002, reflecting the 40th
consecutive annual increase.
OPERATIONAL HIGHLIGHTS
- ----------------------
* Unit case volume growth for the year was led by 6 percent growth in North
America and 5 percent growth in international operations.
* Carbonated soft drinks grew 2 percent during the year, outpacing global
industry trends. Vanilla Coke, Fanta, diet Coke and diet Coke with lemon were
leading contributors to the carbonated soft drink growth of the Company
throughout the year.
* Fanta, the Company's third largest brand and the world's largest flavor
carbonated beverage, grew by 6 percent.
* The Company strengthened its position as one of the leading marketers of
noncarbonated beverages in the world, with 28 percent growth during the year,
increasing the Company's noncarbonated business to 2.9 billion unit cases.
North America
- -------------
* Unit case growth was 6 percent for the full year and 5 percent for the fourth
quarter, led by strong growth in both carbonated and noncarbonated beverages.
Unit case volume benefited from several strategic transactions involving
Seagram's Mixers, Evian, and the Danone water brands. Excluding these brands,
unit case volume grew 4 percent for the year and more than 2 percent in the
fourth quarter.
* During the quarter and for the full year, the Company outpaced the total
non-alcoholic ready-to-drink industry, including share position improvements
in the major beverage categories of carbonated soft drinks, waters, juices,
and juice drinks.
-more-
Page 5
* On a full year basis, trademark Coca-Cola grew 3 percent fueled by innovation
around Vanilla Coke, diet Vanilla Coke, diet Coke with lemon and the Fridge
Pack.
* Noncarbonated beverages continued to post double-digit growth reaching 1.2
billion cases, led by Dasani, Powerade, Minute Maid Lemonade and Simply
Orange.
* The Company has been successful in strategically building a water business
that enhances its offerings to customers. The acquisitions and licensing
agreements completed in 2002 give the Company a family of products in the
U.S. with multiple price points and packaging choices. Together with Dasani,
the number 2 single-serve bottled water brand, which grew volume 40 percent
last year, the Company has become one of the leading players in the water
category both in terms of volume and dollar-value.
* Over the past several years, the Minute Maid business has been transformed as
it increased its overall share position and successfully established a new
brand, "Simply Orange," in the "not from concentrate" segment and built from
scratch a new "adult juice refreshment" category with the very successful
Minute Maid Lemonade, now an 80 million unit case business.
* The Company's "Real" marketing platform has been well received by consumers,
bottlers and the trade in the United States, and will continue to roll out
during 2003.
Asia
- ----
* Unit case volume increased 10 percent for the full year and 10 percent for
the quarter, cycling full year double-digit growth in the prior year.
* Strengthened overall leadership position through continued share gains in key
markets and in carbonated and noncarbonated beverage categories.
* Strong double-digit growth continued throughout the year in India, China and
the Philippines.
* Trademark Coca-Cola and Fanta continued to drive the growth in many key
markets, along with strong performance of local brands such as Thums Up, Qoo
and Georgia coffee.
-more-
Page 6
* In Japan, unit case volume grew 2 percent for the full year and declined 1
percent in the quarter. Despite the challenging economic environment in the
fourth quarter, the Company continued to outpace industry trends. The Company
gained market share in all major beverage categories in both the fourth
quarter and full year, and has now recorded increases in overall market
share for six consecutive quarters.
The Company's core brands - Coca-Cola, Georgia, Aquarius and Sokenbicha -
have continued to strengthen their leadership positions in the quarter, while
other key brands, including Fanta, Canada Dry, Qoo, Disney and Love Body have
shown strong growth in their respective categories. In addition, continued
package innovation, such as hot PET and bottle-cans, is accelerating our
growth in the profitable convenience store and vending channels,
significantly contributing to the Company's overall margin strategy.
Latin America
- -------------
* Unit case volume increased 2 percent for the full year and 5 percent in the
fourth quarter. Growth rates for the year and quarter benefited by
approximately 1 point and 3 points, respectively, from the recent license
agreement for Risco, a water brand in Mexico.
* Full-year results were positively impacted by solid performance in Mexico and
Brazil, offset by very challenging economic conditions in Argentina and
Venezuela. In Brazil, trademark Coca-Cola grew 3 percent and Fanta grew 14
percent during the year.
* The Company is well positioned in noncarbonated beverages in the region as it
has established a comprehensive water strategy, expanded Powerade in 15
countries and established juice drink brands in over 25 countries.
* In Venezuela, production of Coca-Cola products by our bottling partner
stopped on December 2, 2002 due to ongoing strikes and political turmoil.
This situation negatively impacted our growth rate for Latin America by
approximately 1 point in the fourth quarter.
-more-
Page 7
Europe, Eurasia and Middle East
- -------------------------------
* The Company enjoyed a successful year in Europe with solid growth across its
entire range of beverages resulting in 5 percent growth in the fourth quarter
and 5 percent growth for the full year.
* Key contributors to the full year volume performance were growth of 3 percent
for carbonated soft drinks and 36 percent growth for noncarbonated beverages
as the Company continues to profitably drive its total beverage strategy
across Europe.
* Carbonated soft drink innovation saw the expansion of diet Coke / Coca-Cola
light with lemon into 11 countries including the key markets of Great
Britain, France and Belgium resulting in 11 percent growth for the brand.
* The excellent growth of noncarbonated beverages was led by Powerade, rolled
out to 11 markets within Europe, as well as strong innovation initiatives in
water and Nestea.
* Strong growth in Western Europe, excluding Germany, was led by Spain and
Great Britain, and the Company had double-digit growth in the important
emerging markets ofEastern Europe and Russia.
* The German business was stabilized with growth of 1 percent for the full year
and flat performance in the fourth quarter. In December, Germany's results
were negatively impacted by the unexpected implementation of a deposit law on
non-returnable packages for beer, carbonated soft drinks and water. The
change on January 1, 2003 has caused major retailers to significantly lower
their inventory levels of non-returnable packages. While this change in
deposit laws will be disruptive in the short-term as consumers experience
difficulty in obtaining refunds of deposits paid, the Coca-Cola system
remains extremely well placed to take advantage of a probable move by
consumers back to returnable packaging.
-more-
Page 8
Africa
- ------
* Africa had another successful year driven by an intense focus on operational
execution, resulting in full year and fourth quarter unit case growth of 7
percent.
* South and East Africa grew 11 percent for the year driven by both core
carbonated soft drink growth (Coca-Cola and Fanta) and noncarbonated
beverages (water, juices and juice drinks) which grew exponentially in the
year.
* South Africa, the largest market in Africa, grew a solid 5 percent driven by
core carbonated soft drinks.
* Growth in North and West Africa was 3 percent for the year, and 11 percent
for the fourth quarter. Growth was led by Nigeria, the second largest market
in Africa, partially offset by weakness in North Africa.
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 - "Accounting for Stock-Based Compensation." Based on the transition
rules, 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.
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 (quarterly amounts are reflected in the financial section of this release).
The new accounting policy does not impact the cash flows of the Company or
impact the underlying economics of the Company's business model.
-more-
Page 9
STREAMLINING INITIATIVES
- ------------------------
As previously disclosed, during the first quarter of 2003, the Company
initiated steps to streamline and simplify its operations, primarily in North
America and Germany.
In North America, the Company is integrating the operations of its three
separate North American business units -- Coca-Cola North America (including
Danone Waters of North America), Minute Maid (including the Odwalla business),
and Fountain. The integration is expected to result in a headcount reduction of
approximately 1,000 people, with the identification of the individuals expected
to be completed by the end of the first quarter 2003.
In Germany, Coca-Cola Erfrischungsgetraenke AG (CCEAG) has taken steps to
improve its efficiency in sales and distribution, including the closure of three
bottling plants in 2003. The streamlining initiative is expected to affect
approximately 900 employees in Germany.
The above initiatives are expected to result in a full-year 2003 charge to
earnings of approximately $400 million on a pre-tax basis. The charge will be
recorded primarily in the first and second quarters, with certain amounts
impacting the second half of the year.
As a result of the above initiatives, the Company's financial results are
expected to benefit by at least $50 million (pre-tax) in 2003 and at least $100
million (pre-tax) on an annualized basis beginning in 2004.
CONFERENCE CALL
- ---------------
The Company will host a conference call with financial analysts to discuss
the full year 2002 results on February 12, 2003 at 9:30 a.m. (EST). The Company
invites investors to listen to the live audiocast of the conference call at the
Company's website, www.coca-cola.com.
-- Financial Section Follows --
-more-
Page 10
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
FOURTH QUARTER
(UNAUDITED)
(In millions, except per share data)
Three Months Ended December 31,
-----------------------------------------------
2002 2001 % Change
---- ---- --------
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
Interest income 53 98 (46)
Interest expense 43 55 (22)
Equity income (loss) 34 (15) --
Other income (loss) - net (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 --
======= =======
<FN>
* 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.
</FN>
-more-
Page 11
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
FULL YEAR
(In millions, except per share data)
Year Ended December 31,
-----------------------------------------------
2002 2001 % Change
---- ---- --------
NET OPERATING REVENUES $ 19,564 $ 17,545 12
Cost of goods sold 7,105 6,044 18
-------- --------
GROSS PROFIT 12,459 11,501 8
Selling, general and administrative 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
Interest income 209 325 (36)
Interest expense 199 289 (31)
Equity income 384 152 153
Other income (loss) - net (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 --
======= ========
<FN>
* 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.
</FN>
-more-
Page 12
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions, except share data)
ASSETS
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 allowances of $55 in 2002
and $59 in 2001 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
Coca-Cola Enterprises Inc. 972 788
Coca-Cola Hellenic Bottling Company S.A. 872 791
Coca-Cola Amatil Limited 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
========= ========
-more-
Page 13
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions, except share data)
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
========= =========
-more-
Page 14
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions)
Year Ended
December 31,
---------------------------
2002 2001
---- ----
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 disposals 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 year 260 47
Balance at beginning of year 1,866 1,819
--------- ---------
Balance at end of year $ 2,126 $ 1,866
========= =========
-more-
Page 15
THE COCA-COLA COMPANY AND SUBSIDIARIES
Operating Segments
(In millions)
2002 2001
------------------------------------- ----------------------------------------
Income Income
before before
income income
taxes and taxes and
cumulative cumulative
Net effect of Net effect of
Operating Operating accounting Operating Operating accounting
Revenues Income* change* Revenues Income 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
<FN>
* 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.
</FN>
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.
-more-
Page 16
The Coca-Cola Company
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
-more-
Page 17
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
-more-
Page 18
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.
-more-
Page 19
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 PRONOUNCEMENTS
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
-more-
Page 20
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
-more-
Page 21
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 --
-more-
Page 22
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."
-more-
Page 23
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
FIRST QUARTER - Restated For The Impact Of The Change In Accounting For
Stock-Based Compensation
(In millions, except per share data)
Three Months Ended March 31,
---------------------------------
2002 2001 % Change
-------- -------- --------
NET OPERATING REVENUES $ 4,079 $ 3,959 3
Cost of goods sold 1,394 1,345 4
-------- --------
GROSS PROFIT 2,685 2,614 3
Selling, general and administrative expenses
(includes $95 in 2002 and $0 in 2001 related
to the impact of the adoption of the fair
value method of accounting for stock-based
compensation) 1,527 1,334 14
-------- --------
OPERATING INCOME 1,158 1,280 (10)
Interest income 58 81 (28)
Interest expense 46 91 (49)
Equity income (loss) 61 (38) --
Other income (loss) - net (175) 15 --
-------- --------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 1,056 1,247 (15)
Income taxes 324 374 (13)
-------- --------
NET INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 732 873 (16)
-------- --------
Cumulative effect of accounting change,
net of income taxes
SFAS No. 142: Company Operations (367) -- --
Equity Investees (559) -- --
SFAS No. 133 -- (10) --
-------- --------
NET INCOME (LOSS) $ (194) $ 863 --
======== ========
DILUTED NET INCOME PER SHARE BEFORE
CUMULATIVE EFFECT $ 0.29 $ 0.35 (17)
======== ========
DILUTED NET INCOME (LOSS) PER SHARE* $ (0.08) $ 0.35 --
======== ========
AVERAGE SHARES OUTSTANDING - DILUTED* 2,486 2,490 --
======== ========
* For the first quarter, "Basic Net Income (Loss) Per Share" was ($0.08)
for 2002 and $0.35 for 2001 based on "Average Shares Outstanding - Basic" of
2,481 and 2,486 for 2002 and 2001, respectively.
-more-
Page 24
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
SECOND QUARTER - Restated For The Impact Of The Change In Accounting For
Stock-Based Compensation
(In millions, except per share data)
Three Months Ended June 30,
----------------------------------
2002 2001 % Change
-------- -------- --------
NET OPERATING REVENUES $ 5,368 $ 4,653 15
Cost of goods sold 1,927 1,579 22
-------- --------
GROSS PROFIT 3,441 3,074 12
Selling, general and administrative expenses
(includes $92 in 2002 and $0 in 2001 related
to the impact of the adoption of the fair
value method of accounting for stock-based
compensation) 1,881 1,561 20
-------- --------
OPERATING INCOME 1,560 1,513 3
Interest income 52 78 (33)
Interest expense 58 77 (25)
Equity income 176 101 74
Other income (loss) - net (55) (18) --
-------- --------
INCOME BEFORE INCOME TAXES 1,675 1,597 5
Income taxes 452 479 (6)
-------- --------
NET INCOME $ 1,223 $ 1,118 9
======== ========
DILUTED NET INCOME PER SHARE* $ 0.49 $ 0.45 9
======== ========
AVERAGE SHARES OUTSTANDING - DILUTED* 2,487 2,488 --
======== ========
* For the second quarter, "Basic Net Income Per Share" was $0.49 for 2002
and $0.45 for 2001 based on "Average Shares Outstanding - Basic" of 2,479 and
2,488 for 2002 and 2001, respectively.
-more-
Page 25
THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
THIRD QUARTER - Restated For The Impact Of The Change In Accounting For
Stock-Based Compensation
(In millions, except per share data)
Three Months Ended September 30,
---------------------------------
2002 2001 % Change
-------- -------- --------
NET OPERATING REVENUES $ 5,322 $ 4,695 13
Cost of goods sold 2,083 1,692 23
-------- --------
GROSS PROFIT 3,239 3,003 8
Selling, general and administrative expenses
(includes $95 in 2002 and $0 in 2001 related
to the impact of the adoption of the fair
value method of accounting for stock-based
compensation) 1,789 1,692 6
-------- --------
OPERATING INCOME 1,450 1,311 11
Interest income 46 68 (32)
Interest expense 52 66 (21)
Equity income 113 104 9
Other income (loss) - net (62) 117 --
-------- --------
INCOME BEFORE INCOME TAXES 1,495 1,534 (3)
Income taxes 404 460 (12)
-------- --------
NET INCOME $ 1,091 $ 1,074 2
======== ========
DILUTED NET INCOME PER SHARE* $ 0.44 $ 0.43 2
======== ========
AVERAGE SHARES OUTSTANDING - DILUTED* 2,483 2,488 --
======== ========
* For the third quarter, "Basic Net Income Per Share" was $0.44 for 2002
and $0.43 for 2001 based on "Average Shares Outstanding - Basic" of 2,478 and
2,488 for 2002 and 2001, respectively.
-more-
Page 26
THE COCA-COLA COMPANY
- ---------------------
The Coca-Cola Company is the world's largest beverage company and is the
leading producer and marketer of soft drinks. Along with Coca-Cola, recognized
as the world's best-known brand, The Coca-Cola Company markets four of the
world's top five soft drink brands, including diet Coke, Fanta and Sprite.
Through the world's largest distribution system, consumers in nearly 200
countries enjoy The Coca-Cola Company's products at a rate of more than 1
billion servings each day. For more information about The Coca-Cola Company,
please visit our website at www.coca-cola.com.
Forward-Looking Statements
- --------------------------
This press release 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, foreign currency and interest rate fluctuations; changes in
the non-alcoholic beverages business environment, including actions of
competitors and changes in consumer preferences; adverse weather conditions; our
ability to finance expansion plans, share repurchase programs and general
operating activities; regulatory and legal changes; the effectiveness of our
advertising and marketing programs; fluctuations in the cost and availability of
raw materials; our ability to achieve earnings forecasts; changes in economic
and political conditions; our ability to penetrate developing and emerging
markets; litigation uncertainties; and other risks discussed in our Company's
filings with the Securities and Exchange Commission (the "SEC"), including our
Annual Report on Form 10-K, which filings are available from the SEC. You should
not place undue reliance on forward-looking 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.
# # # #