-North America finishes 2005 with strong fourth quarter net pricing growth of 4 percent and volume growth of 2½ percent.
-Fourth-quarter 2005 reported loss of 12 cents includes net expense items of 27 cents, resulting in comparable earnings of 15 cents per diluted share.
-Full-year EPS totaled $1.08, including net expense items of 21 cents.
-2005 cash flow from operations less capital spending totaled $717 million.
ATLANTA, February 9, 2006 -- Coca-Cola Enterprises (NYSE: CCE) today reported 2005 net income of $514 million, or $1.08 per diluted share. The comparability of these results to 2004 net income is affected by net expense items totaling 21 cents per diluted share. These items include tax expense associated with the repatriation of foreign earnings, restructuring costs, and asset write-offs associated with property damage from three major hurricanes. The following table provides detail on these items, as well as other items impacting reported earnings:
Reported 2005 operating income totaled $1.4 billion, which was flat versus prior year. Adjusted for the operating items shown in the above table, full-year 2005 operating income was also flat when compared to 2004. A reconciliation of reported versus comparable operating income is shown on page 11 of this release.
"While we are not satisfied with our overall 2005 results, we are encouraged by the balanced volume and pricing growth in North America," said Lowry F. Kline, chairman of the board and chief executive officer. "These results demonstrate substantial progress in improving our North American business model to drive consistent operating results. We will combine this progress in 2006 with an outstanding calendar of brand extensions and new products and the full year benefit of our new North American operating framework.
"Our success in controlling the growth of our 2005 operating expenses also strengthens our confidence about our future performance," Mr. Kline said. "Our cost control efforts, which limited comparable 2005 operating expense growth to only 1 percent, gave us needed flexibility in dealing with the challenging operating dynamics of last year.
"Though our work to generate pricing growth and achieve operating expense savings was also effective in Europe, our overall performance there remains below our targets as we work to overcome consumer and market trends impacting our business, including weak retail trends in some markets, health and wellness concerns and the continued growth of deep discount retailers," Mr. Kline said. "For 2006, we have a number of operating and sales initiatives in place to meet the needs of consumers and our customers, including new marketing approaches for hard discounters, country-specific brand and product innovation plans, and organizational initiatives that will strengthen both our efficiency and our ability to serve our customers."
Consolidated bottle and can physical case volume increased 1 percent in the fourth quarter and ½ percent for the full year. Fourth quarter volume in North America was up 2½ percent with full-year volume growth of 1 percent. Immediate consumption volume in North America increased 3½ percent in the fourth quarter and 2 percent for the year as Dasani flavored waters, Powerade, Full Throttle and Rockstar energy drinks continue to generate strong sales increases.
Fourth quarter volume in Europe was down 4 percent with volume for the full year down 2 percent. European sales were characterized by declines of regular soft drinks, while sales of diet soft drinks, juice drinks and sports drinks remained strong.
Consolidated net pricing per case increased 2½ percent in the fourth quarter and 2 percent for the full year. Net pricing per case in North America increased 4 percent for the fourth quarter and 3 percent for the full year. European pricing was up ½ percent in the fourth quarter and increased 1 percent for the full year.
Consolidated cost of sales per case increased 4½ percent for the fourth quarter and 3½ percent for full-year 2005. All net pricing and cost of sales per case comparisons are presented excluding the effects of currency translations. The attached key operating information schedule provides a reconciliation of the reported and comparable operating statistics used in this earnings release.
Stock Option Expense
CCE will begin expensing stock options in 2006. 2005 stock option expense not included in reported results totaled approximately $52 million before taxes, or 7 cents per diluted share.
Restructuring Charge
2005 reported results include $80 million of the total $130 million to $140 million of expenses CCE expects to spend on the reorganization of the company's North American business and local proposed restructuring initiatives in Europe. CCE expects to record the remaining expense of $50 million to $60 million throughout 2006.
Repatriation of Foreign Earnings
CCE repatriated approximately $1.6 billion of non-U.S. earnings in the fourth quarter of 2005. The tax charge associated with the repatriation totaled $128 million, or 27 cents per diluted share. CCE also incurred a pre-tax charge, included in interest expense, of approximately $8 million, or 1 cent per diluted share, to restructure a portion of company's debt portfolio to accommodate the efficient repayment of debt in the United States.
2006 Outlook
CCE expects 2006 earnings per diluted share in a range of $1.27 to $1.32, excluding foreign currency translations and expenses related to the restructurings in North America and Europe. This range includes stock option expense. Currency-neutral, comparable operating income is expected to increase 4 percent to 5 percent. CCE expects 2006 cash flow from operations less capital spending to total approximately $700 million. Capital spending is expected to total approximately $1 billion in 2006.
Based on current exchange rates, foreign currency translations could negatively impact operating income by 1 percent to 2 percent and earnings per diluted share by 2 cents to 3 cents.