THE COCA-COLA COMPANY ANNOUNCES FOURTH QUARTER AND FULL YEAR
-- Global unit case volume increased 6 percent in 1998, on top of a
9 percent increase in 1997.
-- The Company continues its long-term strategy of strengthening and
aligning its global bottling system.
-- Earnings per share were $1.42 for the year, including net $0.02 per
share driven primarily by bottling transactions.
-- Fourth-quarter earnings per share were $0.24.
ATLANTA, Jan. 26 /PRNewswire/ -- The Coca-Cola Company (NYSE: KO)
reported another year of record volume, while making significant
progress in strengthening and aligning its global bottling system.
Worldwide unit case volume grew 6 percent to nearly 16 billion unit
cases, an increase of 900 million additional unit cases, and the 44th
consecutive year that the Company has increased unit case volume.
"This past year has been a challenging period for The Coca-Cola Company as economic slowdowns in several key markets had a short-term impact, slowing volume growth and affecting our earnings," said M. Douglas Ivester, chairman, Board of Directors, and chief executive officer. "Even though the economic environment became more uncertain and volatile in the later part of 1998, we strongly believe that our fundamental opportunities for long-term growth have not changed."
"Our business remains very healthy throughout the world and during the past year we increased or maintained our share position in every operating group around the world. In addition, because of the significant investments that we have made over the past several years, our global system is far more capable and stronger today than just a few short years ago."
"As a result, I am very confident that the Coca-Cola system is taking the right approach to our business and we are emerging in a better position to maximize value for all those associated with the Coca-Cola system, including our share owners, bottling partners, customers, and consumers."
Diluted earnings per share for the year were $1.42, including net $0.02
per share driven primarily by bottling transactions. In 1997, diluted
earnings per share were $1.64, including $0.22 per share in net
transaction gains.
Bottling Investments
The Company continued investing aggressively in certain bottling
operations around the world to maximize the strength and efficiency of
production, distribution and marketing systems. The Company believes
this more capable, aligned and efficient bottling system will lead to
long-term growth in volume, improved cash flows and increased
share-owner value for both the Company and the bottlers.
Discussing the Company's bottling strategy, Mr. Ivester said, "Even though the short-term economic uncertainties were top of mind with many people throughout the year, we continued our long-term strategy of strengthening and aligning our bottling system. Our global bottling system is unparalleled and it provides us with the ability to better serve our customers and consumers at the local level in a manner never before achievable."
Some of the steps taken over the past year to enhance the structure and
increase capabilities within the Coca-Cola global bottling system
included:
-- Coca-Cola Amatil Limited spinning-off its European operations into a
new publicly traded European bottler, Coca-Cola Beverages;
-- Exchanging the Company's bottling operations in South Korea for an
increased ownership level in Coca-Cola Amatil;
-- Selling the Company's bottling operations in northern and central Italy
to Coca-Cola Beverages in exchange for cash, notes receivables and
common stock;
-- Acquiring bottling operations in parts of Russia from Inchcape;
-- Strengthening of the German bottling system through Coca-Cola
Erfrischungsgetranke AG (CCE AG), which now distributes approximately
70 percent of the Company's volume in Germany;
-- Acquiring and investing in bottling operations in India;
-- Increasing the Company's investment in selected bottlers around the
world in countries such as Mexico, Chile and Thailand.
At the end of 1998, the Company held equity positions in bottlers
representing approximately 65 percent of its worldwide unit case volume
as alignment and capability throughout the Coca-Cola system continue to
expand.
During the year, the Company's results included net $0.02 per share of
after-tax gains (diluted EPS) resulting primarily from bottling
transactions in Italy and Germany. Full year 1997 results included
$0.22 per share of net after-tax gains (diluted EPS) primarily as a
result of bottling transactions related to Coca-Cola Bottlers
Philippines, Coca-Cola y Hit de Venezuela, Coca-Cola & Schweppes
Beverages, Coca-Cola Beverages (Canada), The Coca-Cola Bottling Company
of New York, Coca-Cola Rhein-Ruhr, and the Company's interest in the
Buenos Aires bottler.
Volume Results
For the full year, worldwide unit case volume grew 6 percent and
gallon shipments increased 6 percent. In the fourth-quarter, worldwide
unit case volume grew 3 percent on a comparable days basis and declined
1 percent on a reported basis. Gallon shipments in the fourth quarter
declined 4 percent. (As previously announced, volume results in the
fourth quarter were impacted by fewer shipping days. There is no
impact on full year 1998 volume results as the fewer shipping days in
the fourth quarter were offset by an equal number of additional
shipping days in the first quarter of 1998).
In the North America Group, full-year unit case volume advanced 6 percent including growth of 6 percent in the United States as a result of continued focus on specific programs designed to increase value for customers through the sale of our products. In the United States, the Company continued to gain share in the fourth quarter and full year, as the Company's CSD volume growth continued to outpace the growth rate of the U.S. soft drink industry. The continuing unit case volume gains and share increases resulted from solid increases in the Company's core brands, the introduction of new products such as Citra, and the system-wide execution of our marketing strategy at the local level. In 1998, the Company also had strong performance from sales of products such as Sprite, Minute Maid soft drinks, Barq's root beer, Fruitopia, POWERaDE and Nestea products.
Fourth-quarter unit case volume increased 5 percent in North America and 5 percent in the United States. North America gallon shipments of concentrates and syrups grew 6 percent in 1998 and were even in the fourth quarter versus the prior year.
In the Latin America Group, unit case volume increased 7 percent and gallon shipments grew 8 percent for the year. Full year unit case volume increased 13 percent in Mexico, 1 percent in Brazil, 7 percent in Argentina, 14 percent in the Central America and Caribbean division and declined 1 percent in the VeneCol division. Growth in Latin America was hampered by the difficult economic environments in Brazil, Venezuela and Colombia. In 1998, operating income advanced 4 percent in the Latin America Group.
Fourth-quarter unit case volume in the Latin America Group grew 3 percent on a comparable days basis and declined 4 percent on a reported basis. Gallon shipments in the fourth quarter declined 5 percent.
In the Middle and Far East Group, unit case volume increased 6 percent and gallon shipments advanced 4 percent in 1998. For the year, the Company had unit case volume gains of 20 percent in China, 22 percent in India and 15 percent in the Middle East and North Africa division. Consumer concerns relating to the existing economic conditions throughout many parts of Asia resulted in unit case sales in Japan being even with the prior year while declines were experienced in Indonesia, Thailand and Korea. Operating income declined 7 percent for the year in the Middle and Far East Group, primarily as a result of the negative impact from exchange rates.
IIn the fourth quarter in the Middle and Far East Group, unit case volume increased 4 percent on a comparable days basis and declined 3 percent on a reported basis. Gallon shipments declined 4 percent in the fourth quarter.
In the Greater Europe Group, unit case volume increased 5 percent, and gallon shipments grew 5 percent in 1998. For the year, unit case volume increased 9 percent in Spain, 5 percent in CCE Europe territories, 5 percent in the Nordic and North Eurasia division and declined 2 percent in Germany. The results in Germany and Russia were negatively impacted by difficult economic conditions, as well as structural change. In 1998, operating income decreased 1 percent in the Greater Europe Group.
Fourth-quarter unit case volume in the Greater Europe Group grew 2 percent on a comparable days basis and declined 4 percent on a reported basis. Gallon shipments in the fourth quarter declined 6 percent.
In the Africa Group, full-year unit case volume increased 7 percent and gallon shipments increased 10 percent. This resulted from full-year unit case volume increases of 14 percent in the Northern Africa Division and 1 percent in the Southern Africa Division. During the second half of 1998, unit case volume in the Southern Africa Division has been negatively impacted by a decline in the economic conditions in South Africa. In addition, civil unrest in Zimbabwe disrupted distribution of the Company's products for several weeks during the fourth quarter. Operating income increased 31 percent in the Africa Group in 1998.
Unit case volume in the Africa Group declined 2 percent in the fourth quarter on a comparable days basis and declined 8 percent on a reported basis. Gallon shipments declined 7 percent in the fourth quarter.
At The Minute Maid Company, the success of Minute Maid Premium
ready-to- drink orange juice continued to build. Volume for this
product line increased 8 percent during the year, with volume up 8
percent and share of sales up 1.5 points during the fourth quarter
alone, despite higher pricing. Much of the volume increase was a
result of substantial growth in calcium-fortified orange juices. In
addition, during the quarter Minute Maid refrigerated and ambient
juices were introduced in South Africa, and the group assumed
responsibility for additional juice brands in South America. Total
annual volume increased 1 percent for The Minute Maid Company, while
fourth quarter volume declined 1 percent due to fewer shipping days
than the prior year.
Global Marketing Actions
The Company continued to implement strong marketing programs that
build brand equity with consumers and clearly differentiate each brand.
The Company experienced solid unit case growth throughout the year from
its core brands.
Notably, Coca-Cola, the Company's 113-year-young flagship brand, was propelled by worldwide unit case volume growth of 5 percent, or approximately 380 million additional cases. Diet Coke grew 8 percent in 1998, with growth of 4 percent in the United States. Sprite also continued its explosive global growth with worldwide unit case sales advancing 9 percent.
The Coca-Cola system continues focusing on localized marketing enabling it to take global strategies and make them locally relevant to consumers throughout the world. With more than 160 brands worldwide and tailored and unique marketing and packaging programs, the Company continues to make those simple moments of refreshment special for consumers.
Examples of ways in which the Company continues building brand equities
with consumers include:
-- The customization of national marketing campaigns to create value for
consumers in local communities. The Coca-Cola Card, our biggest and
most successful promotion ever, was distributed to over 44 million
consumers throughout the United States. Each Coca-Cola Card contained
up to 50 special offers to obtain valuable discounts and offers at
restaurants, retail stores and recreational spots in over 250 local
markets.
-- Providing enjoyment for consumers in markets throughout the world as
part of holiday celebrations -- and other special occasions. In
Mexico City, the Company had an extremely successful integrated
marketing campaign surrounding Christmas, including promotions,
advertising, packaging and a Coca-Cola Christmas Caravan event attended
by nearly 3 million people. Also, half a million people gathered in
Berlin to witness the entry of the Coca-Cola Christmas Caravan through
the Brandenburg Gate.
-- Extending our marketing partnerships with both the National Football
League and the National Basketball Association. The Company also
extended its long-term commitment and support of the world's most
popular sport and its premier event, the FIFA World Cup.
-- Giving millions of NASCAR fans the chance to experience the thrill of
stock car racing with the Coca-Cola Wall of Speed, a 100-foot long,
interactive virtual-reality experience, and a variety of other
promotions.
-- Introducing a new global advertising campaign for diet Coke with the
tag line "Live Your Life." Also, in the United States, diet Coke
drinkers will have the opportunity to receive excerpts from selected
upcoming romance and suspense novels. The excerpts will be inserted
into 40 million 12-pack and cases of diet Coke beginning in February.
-- Tailored consumer marketing promotions such as the Always Time For
Millions promotion in the Philippines, the Red Passion promotion in
Hong Kong, the Destination Coca-Cola Island promotion in Australia, the
Drink The Legends campaign in Russia and the sponsorship of the Russian
National Soccer team.
Income Statement Review
Although worldwide gallon shipments grew 6 percent in 1998 and
selective price increases were implemented, net revenues declined
slightly due to the sale of previously consolidated bottling operations
in Italy, as well as the impact of a stronger U.S. dollar. The sale of
consolidated bottling operations shifts a greater portion of the
Company's net operating revenues to the lower revenue, but higher
margin, concentrate business. Therefore, while net operating revenues
were reduced by the sale of consolidated bottling operations, gross
margins improved over the prior year. Gross profit increased 3 percent
in 1998.
Operating income declined slightly for the year reflecting the economic uncertainties in many markets throughout the world, the sale of previously consolidated bottling operations and the substantial impact of the stronger U.S. dollar. The impact of currency movements on operating income for the full year was an approximate negative 9 percent.
Equity income was also negatively impacted by global economic conditions, as well as continued structural change in the bottling system.
The tax rate was 32 percent in 1998, slightly above our effective rate on operations because certain bottling transactions were taxed at higher rates.
The Company purchased approximately 20 million shares of its common
stock in 1998. Since January 1, 1984, the Company has repurchased 32
percent of its common shares then outstanding, or a cumulative total of
more than 1 billion shares, at an average cost of approximately $12.46
per share.
This news release contains forward-looking statements concerning
long-term volume and EPS objectives and should be read in conjunction
with cautionary statements contained in Exhibit 99.1 in the Company's
most recent Form 10-K.
THE COCA-COLA COMPANY AND SUBSIDIARIES
(In Millions, except per share data)
Fourth Quarter
1998 1997 % Change
NET OPERATING REVENUES $4,458 $4,701 (5)
Cost of Goods Sold 1,299 1,452 (11)
GROSS PROFIT 3,1I59 3,249 (3)
Selling, Administrative and
General Expenses 2,222 2,076 7
OPERATING INCOME 937 1,173 (20)
Interest Income 48 61 (21)
Interest Expense 68 70 (3)
Equity Income (71) 3 ---
Other Income - Net 19 17 ---
INCOME BEFORE INCOME TAXES 865 1,184 (27)
Income Taxes 268 367 (27)
NET INCOME $597 $817 (27)
DILUTED NET INCOME PER SHARE* $0.24 $0.33 (27)
Average Shares Outstanding -
Diluted * 2,489 2,507 (1)
* For the fourth quarter, "Basic Net Income Per Share" was $0.24 for 1998
and $0.33 for 1997 based on "Average Shares Outstanding - Basic" of 2,465
and 2,472 for 1998 and 1997, respectively.
THE COCA-COLA COMPANY AND SUBSIDIARIES
(In Millions, except per share data)
Twelve Months Ended December 31
1998 1997 % Change
NET OPERATING REVENUES $ 18,813 $ 18,868 ---
Cost of Goods Sold 5,562 6,015 (8)
GROSS PROFIT 13,251 12,853 3
Selling, Administrative and
General Expenses 8,284 7,852 6
OPERATING INCOME 4,967 5,001 (1)
Interest Income 219 211 4
Interest Expense 277 258 7
Equity Income 32 155 (79)
Other Income - Net 257 946 ---
INCOME BEFORE INCOME TAXES 5,198 6,055 (14)
Income Taxes 1,665 1,926 (14)
NET INCOME $ 3,533 $ 4,129 (14)
DILUTED NET INCOME PER SHARE* 1.42** $ 1.64** (13)
Average Shares Outstanding -
Diluted* 2,496 2,515 (1)
* For the full year, "Basic Net Income Per Share" was $1.43 for
1998 and $1.67 for 1997 based on "Average Shares Outstanding- Basic"
of 2,467 and 2,477 for 1998 and 1997, respectively.
** Full year 1998 results include net $0.02 per share of after-tax
gains (diluted EPS) driven primarily by bottling transactions. Full
year 1997 results included $0.22 per share of net after-tax gains
(diluted EPS) primarily as a result of various bottling transactions.
SOURCE Coca-Cola Company
01/26/99 /CONTACT: Randy Donaldson, The Coca-Cola Company, 404-676-2683/
/Web site: http://www.coke.com/ (KO)
CO: Coca-Cola Company ST: Georgia IN: FOD SU: ERN
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