FINANCIAL ANALYSIS

The Coca-Cola Company



Coca-Cola Company

Introduction

The Coca-Cola Company (TCCC) owns more than 500 brands of refreshments that are distributed worldwide. It was founded in the late 1800s as a wine producer but, when a local prohibition law was passed, Coke became the world's first flavored soda. The company's brands include Coca-Cola, Diet Coke, Fanta, Sprite and Barq's. In addition to owning and marketing its beverage brands, the company acquired the North America division of Coca-Cola Enterprises Inc. (CCE) in December 2010. This division was the largest marketer, bottler and distributor of Coca-Cola products. The acquisition resulted in a subdivision of TCCC called Coca-Cola Refreshments USA Inc. (CCR-USA) that combines TCCC's national fountain, juice, distribution, marketing and other bottling operations with those of CCE. Prior to the merger, TCCC owned 35.0% of CCE and the remainder was publicly traded on the NYSE. Following the acquisition, TCCC is now one of the largest distributors of Coca-Cola products in the United States.

Discussion

CCE was one of the largest bottlers and distributors of soft drinks in the United States and, therefore, played a key role in this industry. It was established in 1986 when The Coca-Cola Company acquired and merged its two largest bottling and distribution companies: JTL Corporation and BCI Holdings. Since then, the company has acquired many of the smaller Coke bottlers. Of its North American business, about 86.0% comes from US wholesaling. CCE operates in this industry through distribution to supermarkets, restaurants, fast food chains, grocery stores and a number of other institutions. The company's largest customer in the United States is Walmart, which generates more than 13.0% of CCE's annual revenue for the region. Prior to the acquisition by TCCC, IBISWorld estimates that CCE's revenue grew 1.9% per year from 2006 to 2010.

During the recession, the company's North American revenue declined. The company attributes this slump to higher sales prices that deterred customers and lower-than-expected performance for some higher-margin emerging beverage categories. In 2010, sales began to rebound as key customers like Walmart placed aggressive pricing on its products. In 2011, soft drink wholesaling, which is now performed by the Coca-Cola Company subdivision Coca-Cola Refreshments USA, is expected to rise. Sales have already increased in the first quarter, though the integration of the two companies is still being solidified.

Ratios

Profitability Ratios

1/ 29/ 2011

1/ 2 9/ 2010

ROA % (Net)

=

16.28

=

14.14

ROE % (Net)

=

24.35

=

21.19

ROI % (Operating)

=

25.12

=

22.17

EBITDA Margin %

=

12.85

=

11.96

Calculated Tax Rate %

=

28.89

=

30.78

Per Share

1/ 29/ 2011

1/ 29/ 2010

Cash ...