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Subject: KO: Coca Cola Q4 2007 CC Transcript Date: 2/14/2008 11:14 AM
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http://seekingalpha.com/article/64474-coca-cola-q4-2007-earnings-call-transcript?source=wildcard


Neville Isdell

Thank you, Ann and good morning, everyone. I’m going to start this morning with a few brief observations about the results and also highlight some of our accomplishments for 2007. Muhtar will then provide details on operational performance and our priorities for the current year, followed by Gary’s overview of the financials and some additional perspective on 2008.

Today we reported a very positive finish to 2007, with another solid quarter of business results, a strong 5% unit case volume growth and 12% ongoing EPS growth capped an excellent year for The Coca-Cola Company.

In the fourth quarter, all operating units reported volume growth despite tough comparisons in some key markets. We benefited from the diversity of our geographic reach and our breadth and also the breadth of our product portfolio.

We delivered consistent financial performance and achieved results ahead of our long-term growth model in each quarter of 2007. By successfully executing our clearly defined strategies, we achieved the following full year results: 6% unit case volume growth, led by our international operations up 8% and robust 4% sparkling and 12% still beverage growth; 20% net revenue growth -- even when you exclude the acquisition of bottlers, net revenue grew 12%; ongoing operating income growth of 14%; comparable earnings per share of 14%; and cash flow from operations up 20%.

Notably, this is our 11th consecutive quarter of delivering at least 4% volume growth. The strong top line performance is translating to bottom line results as we delivered our fifth consecutive quarter of double-digit comparable EPS.

In 2007, we sold over 1.2 billion incremental unit cases, 1 billion being organic, not acquisition related. What this actually means is that our consumers refresh themselves 1.5 billion times each day with one of our beverages. We’re a company moving successfully by executing against a clear strategic growth agenda. Across the company and throughout the system, talented people are driving growth and developing a culture of innovation and also improving efficiency.

We realize the journey is long and we are by no means declaring victory but we can confidently say that we have a solid foundation upon which to deliver long-term sustainable growth and value for our shareholders.

In 2007, we put our manifesto for growth into action. In fact, we now call it the manifesto in action. We made commitments to strengthen our sparkling portfolio, to enhance our position in still beverages, to improve our capabilities in consumer marketing, customer leadership, and franchise leadership, and ensure that our business is sustainable.

I am pleased to report that we delivered against each one of these commitments and are well-positioned to do so again in 2008 and beyond.

Specifically, we strengthened our position in sparkling beverages with trademarks Coca-Cola, Sprite, and Fanta, all delivering solid unit case growth. In fact, overall we captured 72% of the global sparkling beverage industry growth for the year.

Trademark Coca-Cola continued to be the key driver, with Coca-Cola Zero driving expansion of the category and gaining share. Coca-Cola Zero is now in 55 countries and it has become our 12th billion-dollar brand. Moreover, we’re executing against our three cola strategy with passionate and award-winning global marketing campaigns. This strategy has delivered the highest growth in trademark Coca-Cola since 1998.

As I’ve discussed in the past, sparkling beverages are going to continue to be the backbone of our global growth in both developed and emerging markets. Through integrated marketing and connection of our brands to consumer passion points like the Olympics in 2008, American Idol, and Super Bowl, we are uniquely positioned to capture the highly profitable sparkling beverage opportunity.

We also enhanced and expanded our still beverage business through organic growth and targeted bolt-on acquisitions. The biggest headline was our acquisition of Glaceau and its vitamin water brand. The fast-growing premier active lifestyle beverage has now become our 13th billion-dollar brand.

The acquisition has changed the game in North America beverages and helped align the Coca-Cola system to invest behind a winning portfolio of brands.

Beyond that one headline is continued global success across categories. Trademark Minute Maid increased unit cases 5%, driven by the expansion of Minute Maid Pulpy in China and other emerging markets. We’ve built a strong global juice position in all of the BRIC countries -- Brazil with Jugos del Valle and Suco Mais, Russia with the Multon brands, India with Maaza and now Minute Maid, and of course China, where Minute Maid Pulpy is the number one brand in key metro markets.

In sports drinks and water, we continue to look for the highest value opportunities and drive innovation through functional enhancements.

Additionally, we are starting to make progress in the ready-to-drink tea and coffee categories. While we are number one globally in both categories, we are continuing to innovate in-house as well as work with our global partners Nestle and [Nilli] to capture the opportunity in these fast-growing categories.

This solid performance across the portfolio resulted in our company growing faster than the industry and capturing close to a quarter of the 5.5 billion incremental non-alcoholic ready-to-drink unit cases sold in 2007. We gained non-alcoholic ready-to-drink volume and value share globally, driven by share increases in both sparkling and still beverages.

Our progress in consumer marketing and consumer leadership sparked new interest in our expanding portfolio among shoppers, retail customers, and our bottling partners. The Coke side of life, happiness factory the movie, and other award-winning marketing programs have reignited the energy and the optimism right at the core of our brands, and our bottling partners are investing behind the business and they are driving inspirational markets themselves at the point of sale. The combined efforts across the system are working and driving our winning performance every day in the marketplace.

Next, a commitment that’s become a true passion for me. We recognize that we cannot have a sustainable business unless the communities that we serve are themselves sustainable.

Our commitments center around four key touch stones: water, where we announced our new global partnership with the World Wildlife Fund to conserve seven of the world’s most important watersheds and to become water neutral in all our beverage production processes.

Packaging, where we see opportunities to turn today’s waste products into valuable resources for the future. We announced a significant expansion of our U.S. recycling efforts by investing $60 million, including the building of the world’s largest PET bottle to bottle recycling plant in South Carolina and just last night, we announced the long-term target to recycle or reuse 100% of our aluminum beverage cans which we sell in the U.S., which builds on our previously announced goal to recycle or reuse 100% of our PET plastic bottles.

Climate -- we’re intensifying our efforts to reduce carbon emissions. For example, at the 2008 Summer Olympic Games, we’ll buy more than 5,000 climate friendly coolers and vending machines.

And finally, well-being -- we need all consumers to understand the equation of calories in and calories out. We provide a range of beverage choices for our consumers and believe they thrive at the nexus of refreshment and nutrition. They all play a role in a balance diet for all age groups.

Overall, I am pleased with our accomplishments and strong performance in the quarter and the year. We have put in place a strong foundation and remain confident in our outlook for 2008.

While we continue to monitor the weakness in the U.S. economy, we remain optimistic about the resiliency of our portfolio, particularly in the developing and emerging markets. Of course, our eyes are wide open and we’ll continue to analyze and respond appropriately to both opportunities and challenges. We believe that we will continue to progress off this strong base.

Before I turn the call over to Muhtar, I’d like to make a few comments about our announcement in December. As you know, we announced plans to begin a seamless transition of the CEO responsibilities to Muhtar effective July 1, 2008. This is something that I’ve been engaged with the board on since my return in 2004. I’ve always believed that effective succession must be planned early in the game and also must be one of the core imperatives of how you manage the company.

Having worked closely with Muhtar for nearly 20 years, I am confident that his combination of industry knowledge, operational excellence, strategic vision, and commitment to our people, which he has already demonstrated as President in 2008, will continue to take our company forward.

With that then, let me now turn the call over to Muhtar to provide the details on our operations.
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