Coca-Cola's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Coca-Cola Enterprises Inc. ( CCE)

Q4 2011 Earnings Call

February 9, 2012 11:00 am ET


Thor Erickson – Vice President of Investor Relations

John F. Brock – Chairman and Chief Executive Officer

William W. Douglas III – Executive Vice President and Chief Financial Officer

Hubert Patricot – Executive Vice President and President, European Group


Ian Shackelton – Nomura

William Smith – Deutsche Bank

Lauren Torres – HSBC

Kaumil Gajrawala – UBS Warburg

Steve Powers – Sanford C. Bernstein & Co.

Caroline Levy – CLSA

Judy Hong – Goldman Sachs

Bryan D. Spillane – Bank of America/Merrill Lynch

John Faucher – JPMorgan

Alec Patterson – RCM Investments



Good day, and welcome to the Coca-Cola Enterprises Fourth Quarter 2011 Conference Call. At the request of Coca-Cola Enterprises, this conference is being recorded for instant replay purposes.

At this time, I’d like to turn the conference over to Mr. Thor Erickson, Vice President of Investor Relations. Please go ahead, sir.

Thor Erickson

Thank you, and good morning, everybody. We appreciate you joining us this morning to discuss our fourth quarter and full-year 2011 results and our outlook for 2012.

Before we begin, I’d like to remind you of our cautionary statements. This call will contain forward-looking management comments and other statements reflecting our outlook for future periods. These comments should be considered in conjunction with the cautionary language contained in this morning’s earnings release as well as the detailed cautionary statements found in our most recent annual report on Form 10-K and subsequent SEC filings. A copy of this information is available on our website at

This morning’s prepared remarks will be made by John Brock, our CEO; and Bill Douglas, our CFO. Hubert Patricot, President of our European Group, is also with us on the call this morning. Following the prepared remarks, we will open the call for your questions. In order to give as many people as possible the opportunity to ask questions, please limit yourself to one question, and we will take follow-up questions as time permits.

Now, I’ll turn the call over to John Brock.

John F. Brock

Thank you, Thor, and we welcome you to view as we discuss our results for the fourth quarter and full year 2011, as well as reviewing our outlook for 2012. For 2011, we achieved comparable earnings per diluted common share of $2.18 that was up 22% on a comparable basis. Revenue grew 5.5% and operating income increased 9% both on a comparable and currency neutral basis.

These results are driven by solid volume growth of 3.5%. These are excellent results over our prior year pro forma performance and are in line with or exceed our long-term growth targets. Importantly, these results are another step toward a most important objective, growing value for our shareholders.

2011 also marked our first full year of operation as an exclusively Western European bottler. And we believe these results demonstrate both the value of our operating strategies, as well as our ability to succeed in the Western European markets in which we operate.

This growth achieved amid ongoing global macroeconomic challenges marks the sixth consecutive year of volume and profit growth in our legacy territories. And it reinforces our confidence in our long-term potential. In fact, these are the types of results that we foresaw when we closed the transaction of the Coca-Cola Company to create this Company less than 18 months ago.

Now, let's take a look at some of the key factors behind our earnings. Importantly our core Coca-Cola trademark brands, where at the heart of these results growing approximately 3.5% and delivering more than half of our total volume growth for the year. And that was led by both regular Coca-Cola and Coca-Cola Zero.

In addition, we saw a solid 4% growth in sparkling flavors including an increase of more than 40% in energy driven by Monster as well as the introduction of POWERADE Energy in Great Britain. We also achieved 3% growth in stills led by Capri Sun and Ocean Spray and growth in water led by Soda Fountain and (inaudible).

By territory, volume growth was led by continental Europe, which was up 4.5% while Great Britain volume increased 2.5%. For the fourth quarter volume increased 3% driven primarily by the excellent growth from the continent of 6% and growth of 1% in Great Britain.

As previously forecasted, our full-year pricing per case was below the full-year increase in cost of goods sold per case. Bill will provide more color on this in a few moments, but let me emphasize we remain committed to expanding or maintaining margins over time, even though shifts in business conditions such as those we experienced in 2011 can create margin fluctuations.

Overall we’re pleased by these results. And we are confident that our 2012 business plans will build on this foundation creating value again for our customers and for our shareholders.

As we discussed with you in December, our full year 2012 outlook is inline with or above our long-term objectives despite the impact of a recently enacted tax increase in France. We expect earnings per share growth of about 10% driven by operating income growth in a mid single-digit range and continued execution of our planned share repurchase program.

We anticipate revenue growth in a high single-digit range. Each of these ranges are comparable and currency neutral and include the expected impact of the French tax. We also expect free cash flow in a range of $500 million to $525 million with capital expenditures in the range of $400 million to $425 million. This guidance is build on solid operating and marketing plans that focus on maximizing the benefits of key significant initiatives, which include the London 2012 Olympics and the Euro 2012 Soccer Championship.

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