Coca-Cola Reports Strong Growth in Fourth Quarter and Full Year 2019; Company Achieves or Exceeds All Full Year Guidance

Net Revenues Grew 16% for the Quarter and 9% for the Full Year; Organic Revenues (Non-GAAP) Grew 7% for the Quarter and 6% for the Full Year

Operating Income Grew 19% for the Quarter and 10% for the Full Year; Comparable Currency Neutral Operating Income (Non-GAAP) Grew 23% for the Quarter and 13% for the Full Year

Fourth Quarter EPS Grew 134% to $0.47 and Comparable EPS (Non-GAAP) Grew 1% to $0.44; Full Year EPS Grew 38% to $2.07 and Comparable EPS (Non-GAAP) Grew 1% to $2.11

Cash from Operations Was $10.5 Billion for the Full Year, Up 37%; Full Year Free Cash Flow (Non-GAAP) Was $8.4 Billion, Up 38%

Company Provides 2020 Financial Outlook

The Coca-Cola Company today reported another quarter of strong growth, along with achieving or exceeding all guidance for the full year 2019. The company continued to execute its growth strategy, allowing it to deliver strong revenue and profit growth for the quarter and full year while gaining value share globally.

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"We made good progress in 2019 by delivering on our financial commitments and growing in a more sustainable way," said James Quincey, chairman and CEO of The Coca-Cola Company. "We continue to transform the organization to act with a growth mindset, which gives us confidence in our 2020 targets and our ability to create a better shared future for all of our stakeholders."

• Revenues: Net revenues grew 16% to $9.1 billion for the quarter and 9% to $37.3 billion for the year. Organic revenues (non-GAAP) grew 7% for the quarter and 6% for the year. Revenue growth for the quarter was driven by concentrate sales growth of 2% and price/mix growth of 5%. The quarter included one additional day, which resulted in an approximate 1-point benefit to revenue growth. Revenue growth for the year was driven by concentrate sales growth of 1% and price/mix growth of 5%.
• Margin: For the quarter, operating margin, which included items impacting comparability, was 23.9% versus 23.4% in the prior year, while comparable operating margin (non-GAAP) was 24.8% in both the current and prior year. For the year, operating margin, which included items impacting comparability, was 27.1% versus 26.7% in the prior year. Comparable operating margin (non-GAAP) was 27.9% versus 28.8% in the prior year. For both the quarter and full year, strong underlying margin expansion was more than offset by headwinds from currency and net acquisitions.
• Earnings per share: For the quarter, EPS grew 134% to $0.47, and comparable EPS (non-GAAP) grew 1% to $0.44. For the year, EPS grew 38% to $2.07, and comparable EPS (non-GAAP) grew 1% to $2.11. Both fourth quarter and full year comparable EPS (non-GAAP) performance included the impact of an 8-point currency headwind.
• Market share: The company continued to gain value share in total nonalcoholic ready-to-drink (NARTD) beverages.
• Cash flow: Cash from operations was $10.5 billion for the year, up 37% largely due to strong underlying growth, accelerated timing of working capital initiatives and the reduction of productivity and restructuring costs. Full year free cash flow (non-GAAP) was $8.4 billion, up 38%.

• Gaining share across the total portfolio: In 2019, the company continued to grow its total portfolio, which led to the largest value share gains in almost a decade, with contribution from both sparkling and non-sparkling offerings. In sparkling, trademark Coca-Cola grew 6% retail value globally as it continued to scale innovative offerings such as Coca-Cola Plus Coffee, now available in more than 40 markets. Coca-Cola Zero Sugar continued to expand its footprint, achieving another year of double-digit volume growth. In the non-sparkling portfolio, innocent, one of the company's juice and smoothie brands, continued to perform well led by innovative products such as innocent plus, a premium juice offering with added vitamins. The innocent brand scaled beyond its flagship market of Europe, launching in Japan during 2019 with more expansion planned in 2020.
• Enabling growth through M&A: The company continues to expand its portfolio and capabilities through strategic acquisitions of brands in on-trend categories. Most recently, the company acquired full ownership of the value-added dairy business, fairlife, LLC. Value-added dairy products have been one of the fastest-growing categories in the United States, with fairlife being a large contributor to sales growth. fairlife's continued success has been supported by new product innovations, ranging from lactose-free, ultra-filtered milk with less sugar and more protein than competing brands, to high-protein recovery and nutrition shakes and drinkable snacks. The brand has been supported by the reach of the U.S. Coca-Cola system, with products distributed through the Minute Maid distribution system and Coca-Cola bottlers across the country. The acquisition closed at the start of 2020.
• Continued progress toward a World Without Waste: Packaging remains an ongoing focus, and there were many examples of advances during the year. Bottles made from 100% recycled PET (rPET) were available in 12 markets. Coca-Cola Sweden announced it would be the first market in the world to transition to 100% rPET for all plastic bottles made in-country. The company's investments included $19 million for a new bottle-to-bottle recycling facility in the Philippines. In the United States, the company teamed with partners and major competitors to launch the "Every Bottle Back" program during the fourth quarter. This includes a new $100 million industry fund that will be used to improve sorting, processing and collection in areas with the biggest infrastructure gaps to help increase the amount of recycled plastic available to be remade into beverage bottles.
• Growing revenue while reducing calories: Coca-Cola has teamed with industry counterparts to reduce the amount of calories Americans consume. The Balance Calories Initiative, launched in 2014, is the single-largest voluntary effort by an industry to help fight obesity. Coca-Cola is using its marketing resources and distribution network to boost awareness of, and interest in, the company's ever-expanding portfolio of low- and no-calorie beverages and smaller packaging options, such as 7.5-oz. mini cans. These efforts are yielding results, as consumption of beverage calories has declined, driven by a reduction in calories consumed from full-sugar beverages, even as sales of sparkling soft drinks continue to grow.

Revenues and Volume

Operating Income and EPS

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Revenues and Volume

Operating Income and EPS

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

• Price/mix growth of 5% for the quarter was attributed to positive contribution across all geographic segments and Bottling Investments. Concentrate sales for the quarter were a point behind unit case volume growth, largely due to a reduction in bottler inventory levels related to Brexit. Concentrate sales benefited from one extra day in the quarter, which resulted in an approximate 1-point tailwind. Price/mix growth of 5% for the year was driven by strong price realization and package initiatives across the majority of key markets, in addition to strong growth in Bottling Investments. For the full year, concentrate sales were a point behind unit case volume growth, primarily due to cycling concentrate sales outpacing unit case volume growth in the prior year by a point.
• Unit case volume grew 3% for the quarter and 2% for the full year, led by broad-based growth in developing and emerging markets, along with positive performance in developed markets. Category cluster performance was as follows:
  • Sparkling soft drinks grew 3% in the quarter, driven by strong growth in China, Brazil and Southeast Asia. For the year, sparkling soft drinks grew 2%, led by strong growth across Asia and Europe. For both the quarter and full year, growth was led by trademark Coca-Cola, with volume growth across all geographic segments.
  • Juice, dairy and plant-based beverages were even in the quarter and for the year, as strong performance by Chi in West Africa and innocent juices in Europe was offset by a decline in Rani in the Middle East. For the quarter, volume performance was under pressure as a result of strategic downsizing of key packages in the China juice portfolio.
  • Water, enhanced water and sports drinks grew 2% in the quarter and 3% for the year, led by Ciel and Cristal in Latin America and strong global growth in the sports drinks portfolio, partially offset by the impact of deprioritization of low-margin water brands in key markets, such as China and Japan.

• Tea and coffee volume grew 4% in the quarter and 1% for the year, led by strong performance across the company's portfolio in Japan, Fuze Tea across Western Europe and Leão Fuze Tea in Brazil.

• Operating income grew 19% in the quarter and 10% for the year, which included items impacting comparability and a benefit from acquisitions, partially offset by currency headwinds. Comparable currency neutral operating income (non-GAAP) grew 23% in the quarter and 13% for the year, driven by solid organic revenue (non-GAAP) growth, a benefit from productivity initiatives and a benefit from acquisitions.

• Price/mix grew 3% for the quarter through positive performance across the majority of key markets.
• Unit case volume grew 4% for the quarter, led by strong growth across Nigeria, North Africa, Turkey and Central & Eastern Europe.
• Operating income declined 14% in the quarter, primarily due to a 9-point currency headwind. Comparable currency neutral operating income (non-GAAP) declined 5%, primarily due to a reduction in bottler inventory levels related to Brexit.
• For the full year, the company gained value share in total NARTD beverages in addition to all category clusters.

• Price/mix grew 17% for the quarter, led by price realization and package initiatives in Mexico. All business units achieved positive price/mix in the quarter.
• Unit case volume grew 3% in the quarter, 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 grew 34% in the quarter, which included a 13-point currency headwind. Comparable currency neutral operating income (non-GAAP) grew 47%, primarily due to cycling the timing of concentrate shipments in Brazil in the prior year and operating leverage across all business units.
• For the full year, the company gained value share in total NARTD beverages, in addition to all category clusters with the exception of juice, dairy and plant-based beverages, where the company maintained share.

• Price/mix grew 2% for the quarter, driven by solid performance across the majority of category clusters.
• Unit case volume was even for the quarter across all category clusters, with the exception of water, enhanced water and sports drinks, which grew 3%, driven by strong growth in the sports drinks portfolio, in addition to premium water brands, Topo Chico and smartwater. The company grew volume for trademark Coca-Cola through continued double-digit growth in Coca-Cola Zero Sugar.
• Operating income grew 30% in the quarter, which included a benefit from items impacting comparability. Comparable currency neutral operating income (non-GAAP) grew 9%, led by positive pricing in the marketplace and cycling the timing of expenses in the prior year.
• For the full year, the company gained value share in total NARTD beverages, in addition to all category clusters, with the exception of tea and coffee, where the company maintained share.

• Price/mix grew 5% in the quarter, as positive performance across the majority of markets was further benefited by geographic mix, due to growth in developed markets outpacing certain emerging and developing markets.
• Unit case volume grew 2% in the quarter due to broad-based growth across the majority of key markets, partially offset by soft performance in China. In China, strong growth in sparkling soft drinks was offset by the impact of strategic deprioritization of low-margin water and downsizing of key packages in the juice portfolio.
• Operating income grew 6% in the quarter, which included items impacting comparability. Comparable currency neutral operating income (non-GAAP) grew 5%. Operating income was negatively impacted by geographic mix.
• For the full year, the company gained value share in total NARTD beverages in addition to sparkling soft drinks.

• Reported net revenues in the quarter benefited from the Costa acquisition.
• Price/mix declined 1% in the quarter, largely driven by unfavorable product mix.
• Unit case volume grew 9% in the quarter, led by strong growth in Monster and innocent.
• Operating income growth in the quarter benefited from the Costa acquisition.

• Price/mix grew 5% for the quarter, largely driven by solid performance from the company's bottling operations in South Africa.
• Operating income growth in the quarter was driven by strong underlying operating leverage, primarily in the company's bottling operations in India, and the acquisition of bottling operations in the Philippines, partially offset by items impacting comparability and currency headwinds.

The 2020 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 2020 projected organic revenues (non-GAAP) to full year 2020 projected reported net revenues, full year 2020 projected comparable currency neutral operating income (non-GAAP) to full year 2020 projected reported operating income, or full year 2020 projected comparable EPS (non-GAAP) to full year 2020 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 2020. The unavailable information could have a significant impact on full year 2020 GAAP financial results.

Full Year 2020

The company expects to deliver approximately 5% growth in organic revenues (non-GAAP) and approximately 8% growth in comparable currency neutral operating income (non-GAAP).

For comparable net revenues (non-GAAP), the company expects a slight tailwind from acquisitions, divestitures and structural items and a 0% to 1% currency headwind based on the current rates and including the impact of hedged positions.

For comparable operating income (non-GAAP), the company expects an immaterial impact from acquisitions, divestitures and structural items and a 2% to 3% currency headwind based on the current rates and including the impact of hedged positions.

The company's underlying effective tax rate (non-GAAP) is estimated to be 19.5%.

Given the above considerations, the company expects to deliver comparable EPS (non-GAAP) of approximately $2.25 versus $2.11 in 2019, a 7% increase.

The company expects to deliver free cash flow (non-GAAP) of approximately $8.0 billion through cash from operations of approximately $10.0 billion and capital expenditures of approximately $2.0 billion.

First Quarter 2020 Considerations

Comparable net revenues (non-GAAP) are expected to include a 0% to 1% tailwind from acquisitions, divestitures and structural items in addition to a 2% currency headwind based on the current rates and including the impact of hedged positions.

Comparable operating income (non-GAAP) is expected to include a 5% currency headwind based on the current rates and including the impact of hedged positions.

The first quarter has one less day compared to first quarter 2019.

• 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 were 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.

The company is hosting a conference call with investors and analysts to discuss fourth quarter and full year 2019 operating results today, Jan. 30, 2020, 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.

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