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Coca-Cola Enterprises reports third-quarter 2013 results

DBR Staff Writer Published 25 October 2013

Coca-Cola Enterprises, Inc.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.