Coca-Cola Enterprises, Inc. Reports Third-Quarter 2013 Results

Coca-Cola Enterprises, Inc. (NYSE: CCE)(Euronext Paris: CCE) today reported third-quarter diluted earnings per share of $1.07 on a reported basis, or 82 cents on a comparable basis. Currency translation had a positive impact of approximately 2 cents per share compared to the same quarter a year ago. Third-quarter reported net income was $289 million, or $221 million on a comparable basis. Items affecting comparability are detailed on pages 10 through 13 of this release.

Net sales totaled $2.2 billion, up 5 percent on a reported basis, or up 2½ percent on a currency neutral basis. Third-quarter reported operating income totaled $314 million, an increase of 2½ percent. On a comparable basis, operating income totaled $320 million, an increase of 4½ percent, or 2 percent on a comparable and currency neutral basis.

“Our return to volume growth in the quarter was driven by our operating strategies, customer and consumer support of our brands, and beneficial weather,” said John F. Brock, chairman and chief executive officer. “While we are pleased to return to volume growth, we continue to face persistent macroeconomic headwinds, a challenging consumer and customer environment, and dynamic competitive conditions that are impacting our near-term outlook.

“Long term, we are focused on growth opportunities and realizing the value of our diversified brand portfolio, executing at the highest levels every day, and effectively managing each lever of our business,” Mr. Brock said. “We remain fully committed to our ultimate objective – creating growth in shareowner value.”

OPERATING REVIEW

In the third quarter, volume increased 2½ percent, reflecting improved weather and ongoing marketing initiatives, including the ‘Share a Coke’ campaign. Sparkling drinks grew approximately 4 percent, including growth of 5 percent for Coca-Cola trademark brands. This includes growth of 4 percent for Coca-Cola and 23 percent for Coca-Cola Zero. CCE’s portfolio of energy brands grew 15 percent, driven by growth of Monster and Relentless brands. Still beverages declined 5 percent, including a 6 percent decline in water, lapping growth of 21 percent in the same quarter a year ago. Total volume in Great Britain grew 3 percent, and volume in continental Europe (including Norway and Sweden) increased 2½ percent.

Net pricing per case in the third quarter was up ½ percent and cost of sales per case increased 1½ percent. Operating expenses were down approximately 1½ percent. These figures are comparable and currency neutral.

“Although we returned to volume growth in the third quarter, we continue to manage through the current challenges of the marketplace and the impact of sustained macroeconomic headwinds,” said Hubert Patricot, executive vice president and president, European Group. “We will meet these challenges by working closely with our customers to create value growth, and by managing our resources effectively.”

FULL-YEAR 2013 OUTLOOK

CCE continues to expect 2013 comparable earnings per diluted share in the upper half of the previously stated range of $2.45 to $2.50, including a positive currency translation impact of 1½ percent at recent rates. Including this currency impact, comparable full-year net sales and operating income are now expected to grow in a low single-digit range versus prior year.

CCE continues to repurchase shares under a $1.5 billion share repurchase program that began in January 2013. The company will repurchase at least $1 billion of its shares by the end of 2013. The company also expects its year-end net debt to EBITDA ratio to be within its long-term range of 2½ to 3 times, reflecting the impact of its plan to return cash to shareowners and incremental optimization of its capital structure. These plans may be adjusted depending on economic, operating, or other factors, including acquisition opportunities.

The company expects 2013 free cash flow of approximately $500 million after including a year-over-year increase in cash restructuring expenses in a range of $100 million to $125 million. Capital expenditures are expected to be in a range of $300 million to $325 million. Weighted average cost of debt is expected to be approximately 3 percent and the comparable effective tax rate for 2013 is now expected to be in a range of 26 percent to 27 percent.

CONFERENCE CALL

CCE will host a conference call with investors and analysts today at 10 a.m. EDT. The call can be accessed through the company’s website at www.cokecce.com.

ABOUT CCE

Coca-Cola Enterprises, Inc. (CCE) is the leading Western European marketer, producer, and distributor of non-alcoholic ready-to-drink beverages and one of the world’s largest independent Coca-Cola bottlers. CCE is the sole licensed bottler for products of The Coca-Cola Company in Belgium, continental France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway, and Sweden. We operate with a local focus and have 17 manufacturing sites across Europe, where we manufacture nearly 90 percent of our products in the markets in which they are consumed. Corporate responsibility and sustainability is core to our business, and we have been recognized by leading organizations in North America and Europe for our progress in water use reduction, carbon footprint reduction, and recycling initiatives. For more information about our company, please visit our website at www.cokecce.com and follow us on Twitter at @cokecce.

FORWARD-LOOKING STATEMENTS

Included in this news release are forward-looking management comments and other statements that reflect management’s current outlook for future periods. As always, these expectations are based on currently available competitive, financial, and economic data along with our current operating plans and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. The forward-looking statements in this news release should be read in conjunction with the risks and uncertainties discussed in our filings with the Securities and Exchange Commission (“SEC”), including our Form 10-K for the year ended December 31, 2012 and other SEC filings.

COCA-COLA ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; in millions, except per share data)
     
Third Quarter First Nine Months
2013     2012 2013     2012
Net sales $ 2,174 $ 2,070 $ 6,180 $ 6,146
Cost of sales 1,387   1,295   4,006   3,908
Gross profit 787 775 2,174 2,238
Selling, delivery, and administrative expenses 473   469   1,477   1,460
Operating income 314 306 697 778
Interest expense, net 26 23 75 69
Other nonoperating income (expense) 1   1   (3 ) 4
Income before income taxes 289 284 619 713
Income tax expense   21   87   136
Net income $ 289   $ 263   $ 532   $ 577
Basic earnings per share $ 1.09   $ 0.91   $ 1.96   $ 1.94
Diluted earnings per share $ 1.07   $ 0.89   $ 1.92   $ 1.90
Dividends declared per share $ 0.20   $ 0.16   $ 0.60   $ 0.48
Basic weighted average shares outstanding 264   291   271   297
Diluted weighted average shares outstanding 269   297   277   304
 
 

COCA-COLA ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; in millions)
     
Third Quarter First Nine Months
2013     2012 2013     2012
Net income $ 289 $ 263 $ 532 $ 577
Components of other comprehensive income:
Currency translations
Pretax activity, net 204 127 14 119
Tax effect        
Currency translations, net of tax 204 127 14 119
Net investment hedges
Pretax activity, net (52 ) (31 ) (34 ) (18 )
Tax effect 18   9   12   4  
Net investment hedges, net of tax (34 ) (22 ) (22 ) (14 )
Cash flow hedges
Pretax activity, net (10 ) (15 ) 18 (18 )
Tax effect 3   4   (5 ) 4  
Cash flow hedges, net of tax (7 ) (11 ) 13 (14 )
Pension plan adjustments
Pretax activity, net 8 4 20 13
Tax effect (2 ) (1 ) (4 ) (3 )
Pension plan adjustments, net of tax 6   3   16   10  
Other comprehensive income, net of tax 169   97   21   101  
Comprehensive income $ 458   $ 360   $ 553   $ 678  
 
 

COCA-COLA ENTERPRISES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions)
   
September 27, 2013 December 31, 2012
ASSETS
Current:
Cash and cash equivalents $ 488 $ 721
Trade accounts receivable 1,689 1,432
Amounts receivable from The Coca-Cola Company 80 66
Inventories 442 386
Other current assets 230   157  
Total current assets 2,929 2,762
Property, plant, and equipment, net 2,282 2,322
Franchise license intangible assets, net 3,927 3,923
Goodwill 125 132
Other noncurrent assets 429   371  
Total assets $ 9,692   $ 9,510  
LIABILITIES
Current:
Accounts payable and accrued expenses $ 2,060 $ 1,844
Amounts payable to The Coca-Cola Company 140 103
Current portion of debt 594   632  
Total current liabilities 2,794 2,579
Debt, less current portion 3,321 2,834
Other noncurrent liabilities 249 276
Noncurrent deferred income tax liabilities 1,119   1,128  
Total liabilities 7,483 6,817
SHAREOWNERS’ EQUITY
Common stock 3 3
Additional paid-in capital 3,881 3,825
Reinvested earnings 1,494 1,126
Accumulated other comprehensive loss (409 ) (430 )
Common stock in treasury, at cost (2,760 ) (1,831 )
Total shareowners’ equity 2,209   2,693  
Total liabilities and shareowners’ equity $ 9,692   $ 9,510  
 
 

COCA-COLA ENTERPRISES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)
 
First Nine Months
2013     2012
Cash Flows from Operating Activities:
Net income $ 532 $ 577
Adjustments to reconcile net income to net cash derived from operating activities:
Depreciation and amortization 231 252
Share-based compensation expense 24 27
Deferred income tax benefit (66 ) (72 )
Pension expense less than contributions (3 ) (52 )
Net changes in assets and liabilities (121 ) (49 )
Net cash derived from operating activities 597   683  
Cash Flows from Investing Activities:
Capital asset investments (220 ) (254 )
Capital asset disposals   13  
Net cash used in investing activities (220 ) (241 )
Cash Flows from Financing Activities:
Net change in commercial paper 182
Issuances of debt 459 430
Payments on debt (220 ) (13 )
Shares repurchased under share repurchase programs (888 ) (600 )
Dividend payments on common stock (161 ) (142 )
Other financing activities, net 8   (5 )
Net cash used in financing activities (620 ) (330 )
Net effect of currency exchange rate changes on cash and cash equivalents 10   7  
Net Change in Cash and Cash Equivalents (233 ) 119
Cash and Cash Equivalents at Beginning of Period 721   684  
Cash and Cash Equivalents at End of Period $ 488   $ 803  
 
 

COCA-COLA ENTERPRISES, INC.

RECONCILIATION OF GAAP TO NON-GAAP (a)

(Unaudited; in millions, except per share data which is calculated prior to rounding)
 
Third-Quarter 2013
Cost of Sales  

Selling,Delivery, andAdministrativeExpenses
 

OperatingIncome
 

Income TaxExpense
  Net Income  

DilutedEarnings PerShare
Reported (GAAP) (b) $ 1,387 473 314 $ 289 $ 1.07
Items Impacting Comparability:
Mark-to-Market Effects (c) 1 (1 ) (1 )
Restructuring Charges (d) (7 ) 7 3 4 0.01
Net Tax Items (e)       71   (71 ) (0.26 )
Comparable (non-GAAP) $ 1,388   466   320   74   $ 221   $ 0.82  
Diluted Weighted Average Shares Outstanding 269
 
 
Third-Quarter 2012
Cost of Sales

Selling,Delivery, andAdministrativeExpenses
Operating Income

Income TaxExpense
Net Income

DilutedEarnings PerShare
Reported (GAAP) (b) $ 1,295 469 306 21 $ 263 $ 0.89
Items Impacting Comparability:
Mark-to-Market Effects (c) 8 4 (12 ) (4 ) (8 ) (0.03 )
Restructuring Charges (d) (12 ) 12 5 7 0.02
Net Tax Items (e)       50   (50 ) (0.17 )
Comparable (non-GAAP) $ 1,303   461   306   72   $ 212   $ 0.71  
Diluted Weighted Average Shares Outstanding 297
 
(a) These non-GAAP measures are provided to allow investors to more clearly evaluate our operating performance and business trends. Management uses this information to review results excluding items that are not necessarily indicative of ongoing results. The adjusting items are based on established defined terms and thresholds and represent all material items management considered for year-over-year comparability.
(b) As reflected in CCE's U.S. GAAP Condensed Consolidated Financial Statements.
(c) Amounts represent the net out of period mark-to-market impact of non-designated commodity hedges.
(d) Amounts represent non-recurring restructuring charges.
(e) Amounts represent the deferred tax benefit related to the enactment of corporate income tax rate reductions in the United Kingdom.
 
 

COCA-COLA ENTERPRISES, INC.

RECONCILIATION OF GAAP TO NON-GAAP (a)

(Unaudited; in millions, except per share data which is calculated prior to rounding)
   
First Nine Months 2013
Cost of Sales  

Selling,Delivery, andAdministrativeExpenses
 

OperatingIncome
 

Income TaxExpense
  Net Income  

DilutedEarnings PerShare
Reported (GAAP) (b) $ 4,006 1,477 697 87 $ 532 $ 1.92
Items Impacting Comparability:
Mark-to-Market Effects (c) (8 ) 8 2 6 0.02
Restructuring Charges (d) (4 ) (105 ) 109 31 78 0.29
Net Tax Items (e)       71   (71 ) (0.26 )
Comparable (non-GAAP) $ 3,994   1,372   814   191   $ 545   $ 1.97  
Diluted Weighted Average Shares Outstanding 277
 
 
First Nine Months 2012
Cost of Sales

Selling,Delivery, andAdministrativeExpenses

OperatingIncome

Income TaxExpense
Net Income

DilutedEarnings PerShare
Reported (GAAP) (b) $ 3,908 1,460 778 136 $ 577 $ 1.90
Items Impacting Comparability:
Mark-to-Market Effects (c) 3 (3 ) (1 ) (2 ) (0.01 )
Restructuring Charges (d) (34 ) 34 11 23 0.08
Net Tax Items (e)       50   (50 ) (0.17 )
Comparable (non-GAAP) $ 3,911   1,426   809   196   $ 548   $ 1.80  
Diluted Weighted Average Shares Outstanding 304
 
(a) These non-GAAP measures are provided to allow investors to more clearly evaluate our operating performance and business trends. Management uses this information to review results excluding items that are not necessarily indicative of ongoing results. The adjusting items are based on established defined terms and thresholds and represent all material items management considered for year-over-year comparability.
(b) As reflected in CCE's U.S. GAAP Condensed Consolidated Financial Statements.
(c) Amounts represent the net out of period mark-to-market impact of non-designated commodity hedges.
(d) Amounts represent non-recurring restructuring charges.
(e) Amounts represent the deferred tax benefit related to the enactment of corporate income tax rate reductions in the United Kingdom.
 
 

COCA-COLA ENTERPRISES, INC.

RECONCILIATION OF GAAP TO NON-GAAP SEGMENT INCOME (a)

(Unaudited; in millions)
   
Third-Quarter 2013
Europe   Corporate   Operating Income
Reported (GAAP) (b) $ 350   $ (36 )   $ 314
Items Impacting Comparability:
Mark-to-Market Effects (c) (1 ) (1 )
Restructuring Charges (d) 7         7  
Comparable (non-GAAP) $ 357     $ (37 )   $ 320  
 
Third-Quarter 2012
Europe   Corporate   Operating Income
Reported (GAAP) (b) $ 322 $ (16 ) $ 306
Items Impacting Comparability:
Mark-to-Market Effects (c) (12 ) (12 )
Restructuring Charges (d) 12         12  
Comparable (non-GAAP) $ 334     $ (28 )   $ 306  
 
 
First Nine Months 2013
Europe   Corporate   Operating Income
Reported (GAAP) (b) $ 804 $ (107 ) $ 697
Items Impacting Comparability:
Mark-to-Market Effects (c) 8 8
Restructuring Charges (d) 109         109  
Comparable (non-GAAP) $ 913     $ (99 )   $ 814  
 
First Nine Months 2012
Europe   Corporate   Operating Income
Reported (GAAP) (b) $ 879 $ (101 ) $ 778
Items Impacting Comparability:
Mark-to-Market Effects (c) (3 ) (3 )
Restructuring Charges (d) 34         34  
Comparable (non-GAAP) $ 913     $ (104 )   $ 809  
 

(a) These non-GAAP measures are provided to allow investors to more clearly evaluate our operating performance and business trends. Management uses this information to review results excluding items that are not necessarily indicative of ongoing results. The adjusting items are based on established defined terms and thresholds and represent all material items management considered for year-over-year comparability.
(b) As reflected in CCE's U.S. GAAP Condensed Consolidated Financial Statements.
(c) Amounts represent the net out of period mark-to-market impact of non-designated commodity hedges.
(d) Amounts represent non-recurring restructuring charges.
 
 

COCA-COLA ENTERPRISES, INC.

RECONCILIATION OF NON-GAAP MEASURES

(Unaudited; in millions, except percentages)
   

Third-Quarter 2013Change VersusThird-Quarter 2012

First Nine Months 2013Change VersusFirst Nine Months 2012

Net Sales Per Case
Change in Net Sales per Case 3.0% 1.5%
Impact of Excluding Post Mix, Non-Trade, and Other —%   —%
Bottle and Can Net Pricing Per Case 3.0% 1.5%
Impact of Currency Exchange Rate Changes (2.5)%   (1.0)%
Currency-Neutral Bottle and Can

Net Pricing Per Case (a)
0.5% 0.5%
 

Cost of Sales Per Case
Change in Cost of Sales per Case 4.5% 3.5%
Impact of Excluding Post Mix, Non-Trade, and Other (0.5)%   (0.5)%
Bottle and Can Cost of Sales Per Case 4.0% 3.0%
Impact of Currency Exchange Rate Changes (2.5)%   (1.0)%
Currency-Neutral Bottle and Can

Cost of Sales Per Case (a)
1.5% 2.0%
     

Physical Case Bottle and Can Volume
Change in Volume 2.5% (1.0)%
Impact of Selling Day Shift —%   0.5%

Comparable Bottle and Can Volume (b)
2.5%   (0.5)%
 
 
First Nine Months

Reconciliation of Free Cash Flow (c)
2013   2012
Net Cash Derived From Operating Activities $ 597 $ 683
Less: Capital Asset Investments (220 ) (254 )
Add: Capital Asset Disposals     13  
Free Cash Flow $ 377     $ 442  
 
September 27, December 31,

Reconciliation of Net Debt (d)
2013   2012
Current Portion of Debt $ 594 $ 632
Debt, Less Current Portion 3,321 2,834
Less: Cash and Cash Equivalents (488 )   (721 )
Net Debt $ 3,427     $ 2,745  
 

(a) The non-GAAP financial measures "Currency-Neutral Bottle and Can Net Pricing Per Case" and "Currency-Neutral Bottle and Can Cost of Sales per Case" are used to more clearly evaluate bottle and can pricing and cost trends in the marketplace. These measures exclude items not directly related to bottle and can pricing or cost and currency exchange rate changes.
(b) The non-GAAP measure "Comparable Bottle and Can Volume" is used to analyze the performance of our business on a constant period basis. There were the same number of selling days in the third quarter of 2013 versus the third quarter of 2012. There was one less selling day in the first nine months of 2013 versus the first nine months of 2012.
(c) The non-GAAP measure "Free Cash Flow" is provided to focus management and investors on the cash available for debt reduction, dividend distributions, share repurchase, and acquisition opportunities.
(d) The non-GAAP measure "Net Debt" is used to more clearly evaluate our capital structure and leverage.

Copyright Business Wire 2010

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