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Coca-Cola Company: Global Public Affairs & Communications Department

The following excerpt is from the company's SEC filing.

P.O. Box 1734

Atlanta, GA 30301

THE COCA-COLA COMPANY REPORTS

FIRST QUARTER 2016 RESULTS

Reported net revenue declined 4% and organic revenue grew 2% in the quarter, impacted by one less day in our reporting calendar.

Reported EPS was $0.34 and comparable EPS was $0.45.

Global volume grew 2%.

Global price/mix was a positive 1%, as solid underlying pricing was partially offset by segment mix.

Comparable currency neutral operating margin expanded.

Gained global value share in nonalcoholic ready-to-drink beverages.

Full-year comparable currency neutr al earnings outlook remains unchanged.

The Coca-Cola Company today reported first quarter 2016 operating results. “We continue to transform The Coca-Cola Company into a company that is focused on our core value creation model of building strong brands, enhancing customer value and leading our franchise system,” said Muhtar Kent, Chairman and Chief Executive Officer of The Coca-Cola Company. “Amidst a challenging global macro environment, the continued focus on our five strategic initiatives enabled us to gain global value share in the first quarter and deliver positive top-line growth and strong underlying margin expansion. Our operating results are driven by our commitment to sustainable growth, and we are confident that we have the right strategies in place to achieve our full-year outlook and drive long-term value for our system and shareowners.”

FIRST QUARTER 2016 OPERATING REVIEW

TOTAL COMPANY

Percent Change

Unit Case Volume

Sparkling Beverages

Still Beverages

Concentrate Sales/Reported Volume

Price/Mix

Currency

Acquisitions, Divestitures and Structural Items, Net

Reported Net Revenues

Organic Revenues *

Reported Income Before Taxes

Comparable CN Income Before Taxes (Structurally Adjusted) *

Organic revenue and comparable currency neutral (CN) income before taxes (structurally adjusted) are non-GAAP financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule.

Organic revenue growth of 2% in the quarter was driven by concentrate sales growth and 1 point of positive price/mix. Concentrate sales growth was negatively impacted by one less day in the quarter. After adjusting for the one less day in the quarter, concentrate sales were in line with unit case sales. Price/mix was driven by solid underlying pricing partially offset by 1 point of segment and geographic mix. Acquisitions, divestitures and structural items primarily include the impact of refranchised territories, as well as the net impact of the brand transfer agreement associated with the closing of the transaction with Monster Beverage Corporation (“Monster”) in 2015 and the expanded distribution of Monster's beverage products.

We gained global volume and value share in sparkling beverages in a challenging macro environment. Value share grew ahead of volume share, emphasizing our focus on accelerating our revenue growth management strategies. Sparkling beverage volume was even in the quarter.

In still beverages we gained global volume and value share. Solid volume growth was realized across all key still beverage categories, except juice and juice drinks which registered a small decline in the quarter.

Comparable currency neutral income before taxes (structurally adjusted) growth outpaced organic revenue growth in the quarter primarily due to the impact of our productivity

initiatives, timing of expenses and an increase in equity income. The benefit of these items was partially offset by increased marketing investments in line with our objectives.

The reported effective tax rate for the quarter was 21.2%. The underlying effective tax rate was 22.5%

The variance between the reported rate and the underlying rate was due to the tax effect of various items impacting comparability, separately disclosed in the Reconciliation of GAAP and Non-GAAP Financial Measures schedule.

Reported EPS was $0.34 and comparable EPS was $0.45 in the quarter. Items impacting comparability decreased reported EPS by a net $0.11 and were primarily related to noncash charges related to refranchising certain territories in North America and costs associated with our previously announced productivity, integration and restructuring initiatives.

Fluctuations in foreign currency exchange rates resulted in a 10 point headwind on comparable operating income and a 12 point headwind on both comparable income before taxes and EPS in the quarter.

First quarter cash from operations was $604 million, negatively impacted by contributions to our U.S. pension plans of $471 million, fluctuations in foreign currency exchange rates, and one less day in the quarter.

Net share repurchases totaled $155 million in the quarter.

EURASIA AND AFRICA

Comparable CN Income Before Taxes *

Organic revenue and comparable currency neutral (CN) income before taxes are non-GAAP financial measures. Refer to the Notes and Reconciliation of GAAP and Non-GAAP Financial Measures schedule.

Organic revenue growth in the quarter was due to solid price/mix, partially offset by the impact of one less day in the quarter and the timing of concentrate shipments in key markets across the segment

The positive price/mix was primarily attributable to favorable product and geographic mix across several markets. Acquisitions, divestitures and structural items primarily reflect the unfavorable impact from the brand transfer agreement associated with the closing of the transaction with Monster in 2015.

Comparable currency neutral income before taxes lagged organic revenue growth in the quarter due to timing of expenses and the unfavorable structural impact of the brand transfer agreement with Monster.

We gained value share in total nonalcoholic ready-to-drink (“NARTD”) beverages in the quarter. The sparkling beverage volume decline in the quarter was primarily driven by a decline in Trademark Coca-Cola. Still beverage volume growth in the quarter was driven by double-digit growth in packaged water, 7% growth in sports drinks and 2% growth in ready-to-drink tea, partially offset by a 1% decline in juice and juice drinks. Unit case volume growth in the quarter included mid single-digit growth in our Central, East & West Africa business unit and 2% growth in our Southern Africa business unit, partially offset by a high single-digit decline in our Russia, Ukraine & Belarus business unit and a low single-digit decline in both our Middle East & North Africa and Turkey, Caucasus & Central Asia business units.

EUROPE

Organic revenue was even reflecting positive price/mix of 2 points, offset by lower concentrate sales which were impacted by one less day in the quarter. The positive price/mix reflects an increase in pricing and favorable product mix in key markets. Acquisitions, divestitures and structural items reflect the unfavorable impact from the brand transfer agreement associated with the closing of the transaction with Monster in 2015.

Comparable currency neutral income before taxes lagged organic revenue in the quarter primarily due to timing of expenses and the unfavorable structural impact of the brand transfer agreement with Monster.

We gained value share in total NARTD beverages in the quarter. The sparkling beverage volume decline in the quarter was driven by a 3% decline in Trademark Coca-Cola, partially offset by 3% growth in Fanta and double-digit growth in energy drinks. Still beverage volume growth in the quarter was driven by 7% growth in packaged water and 5% growth in both sports drinks and ready-to-drink tea, partially offset by a mid single-digit decline in juice and juice drinks.

LATIN AMERICA

Organic revenue growth in the quarter was driven by strong positive price/mix reflecting an increase in pricing and product mix. Positive price/mix was realized in each of our four business units, particularly in the higher inflationary markets within our South Latin and Latin Center business units.

Comparable currency neutral income before taxes grew in line with organic revenues in the quarter primarily due to positive operating leverage resulting from our productivity initiatives and timing of expenses, offset by increased marketing investments.

We gained value share in still beverages (excluding packaged water) in the quarter. Sparkling beverage volume was even in the quarter as 5% growth in Coca-Cola Zero and 2% growth in Sprite were offset by a 1% decline in brand Coca-Cola. Still beverage volume growth in the quarter was driven by double-digit growth in both sports drinks and juice and juice drinks, high single-digit growth in ready-to-drink tea and 3% growth in packaged water. Unit case volume growth was driven by 5% growth in Mexico and 3% growth in our Latin Center business unit, partially offset by a 6% decline in Brazil.

NORTH AMERICA

Organic revenue growth was driven by 3 points of positive price/mix, partially offset by lower concentrate sales which were impacted by one less day in the quarter. After adjusting for the one less day in the quarter and the impact of acquired volume, concentrate sales growth and unit case sales growth were in line.

Comparable currency neutral income before taxes growth outpaced organic revenue growth in the quarter primarily due to favorable operating leverage resulting from the impact of our productivity initiatives and timing of expenses, partially offset by a net negative 2 point structural impact from refranchised territories and the brand transfer agreement associated with the closing of the transaction with Monster in 2015.

We gained value share in total NARTD beverages for the 24

consecutive quarter driven by the continued increase in the quantity and quality of our marketing investments along with our disciplined approach to pricing and packaging strategies. Sparkling beverage volume was even in the quarter. Growth in Sprite, Fanta and energy drinks was offset by a decline in Trademark Coca-Cola. Still beverage volume growth in the quarter was driven by juice and juice drinks, sports drinks, ready-to-drink tea and packaged water.

ASIA PACIFIC

Organic revenue growth was driven by strong concentrate sales growth, partially offset by 5 points of negative price/mix. Concentrate sales growth outpaced unit case sales growth due to timing of shipments. The unfavorable price/mix was primarily driven by negative product and geographic mix. Acquisitions, divestitures and structural items reflect the unfavorable impact from the brand transfer agreement associated with the closing of the transaction with Monster in 2015 and a change in the funding arrangement with our bottlers in China.

Comparable currency neutral income before taxes growth outpaced organic revenue growth in the quarter primarily due to favorable operating leverage resulting from the impact of our productivity initiatives and timing of expenses.

We gained value share in total NARTD beverages in the quarter. Sparkling beverage volume growth in the quarter was driven by 3% growth in Trademark Coca-Cola and 2% growth in Fanta, partially offset by a mid single-digit decline in Sprite. Still beverage volume growth in the quarter was driven by double-digit growth in both packaged water and ready-to-drink tea and 8% growth in ready-to-drink coffee, partially offset by a double-digit decline in juice and juice drinks. Unit case volume growth in the quarter reflected double-digit growth in both our India & South West Asia and ASEAN business units and 4% growth in Japan, partially offset by a 2% decline in China.

BOTTLING INVESTMENTS

Organic revenue in the quarter was even, in line with reported volume. The even price/mix reflects positive pricing across several of our bottling operations, offset by geographic mix and unfavorable product mix within our China operations. Acquisitions, divestitures and structural items primarily reflect the unfavorable impact of the refranchised North America bottling territories, partially offset by the benefit from the expanded distribution of Monster's beverage products.

Comparable currency neutral income before taxes growth outpaced organic revenue in the quarter primarily due to favorable operating leverage resulting from the impact of our productivity initiatives and timing of expenses, as well as an increase in equity income.

2016 OUTLOOK

The Company continues to expect organic revenue to be up 4% to 5% in 2016, in line with our long

term target. The net impact of acquisitions, divestitures and structural items on comparable net revenues is expected to be a 4 to 5 point headwind and based on the current spot rates, currency is expected to be a 2 to 3 point headwind, including the impact of hedged positions for the full year.

The Company expects comparable currency neutral income before taxes (structurally adjusted) to grow 6% to 8% in 2016, in line with our long

term target, as strong operating profit growth is expected to be partially offset by increased interest expense. The net impact of structural items is expected to be a 3 to 4 point headwind and based on the current spot rates, currency is expected to be an 8 to 9 point headwind, including the impact of hedged positions for the full year.

Given the above, the Company expects full-year comparable currency neutral EPS growth to be 4% to 6% including the impact of 3 to 4 points of structural headwind, primarily due to refranchising, on comparable currency neutral income before taxes. Based on the current spot rates, currency is expected to be an 8 to 9 point headwind, including the impact of hedged positions for...


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