July 28/Atlanta/Business Wire -- Coca-Cola Enterprises reported 2Q 2010 net income of $356 million, or $0.69 per diluted common share. Excluding items affecting comparability, 2Q 2010 net income was $405 million or $0.79 per diluted share.

"These results reflect strong day-to-day execution of key strategies and operating initiatives and our commitment to deliver against our full year objectives," said John F. Brock, chairman and chief executive officer. "As we work to complete our transaction with The Coca-Cola Company and meet the challenges of weak macroeconomic conditions, we continue to focus on driving value for our customers, our consumers, and our shareowners.

"The success of these efforts has enabled us to increase our expectations for the year, with comparable earnings per share growth now in a range of $1.73 to $1.77 after including a negative currency impact of approximately $0.06 per share," Brock said. "In addition, the transaction with The Coca-Cola Company remains on track to close during the fourth quarter."

European Results
Second quarter European revenue grew 5%, and comparable operating income increased 13% both on a currency neutral basis. Including the impact of currency, 2Q European revenue declined 2.5%, and comparable operating income increased 5.5%. Volume increased 5.5%, with 3.5% growth in Coca-Cola trademark brands, including 14% growth for Coca-Cola Zero. Still beverages grew more than 15%, driven primarily by expanded distribution of Capri Sun and the addition of Ocean Spray. Currency neutral net pricing per case increased modestly, and cost of sales per case decreased 0.5%.

"Europe achieved solid 2Q results through continued growth of our core Coca-Cola trademark brands, still portfolio expansion, solid execution of marketplace strategies and World Cup promotions, and the benefits of ongoing operating initiatives," Brock said. "Many challenges remain, but we believe Europe represents an outstanding platform for long-term, profitable growth."

North American Results
North American results reflect the benefits of volume growth, modest sequential pricing improvement through price/package architecture initiatives, lower cost of sales, and operating expense control. Revenue increased 0.5%, and comparable operating income grew 21%. Excluding the impact of currency, revenue declined 0.5%, and comparable operating income increased 19%. Second quarter volume grew 0.5% through a combination of customer-driven promotional activity and ongoing marketplace initiatives. Core Coca-Cola red, black, and silver brands grew volume 1.5%, including growth of 12% for Coca-Cola Zero. Additionally, second quarter results benefitted from a 2.5% increase in single-serve beverage volume. Pricing per case declined modestly and cost of sales per case was down 3%.

"Strong North American operating income growth represents a combination of pricing diligence amid a dynamic and competitive marketplace environment, the benefits of our operating and effectiveness initiatives, and lower cost of goods," said Brock. "Going forward, we remain committed to our North American marketplace strategies that are built around our price/package architecture initiatives and believe North America continues to offer solid long term growth opportunities."

Full-year 2010 Outlook
Management now expects full-year comparable 2010 earnings per diluted common share in a range of $1.73 to $1.77. This range includes an expected negative currency impact of approximately $0.06 per share and excludes nonrecurring items.

Operating income is expected to increase in a 10-12% range, with mid single-digit growth in North America and high single-digit growth in Europe. Corporate operating expenses are expected to be below prior year. The company expects revenue to increase at a low single-digit rate, with mid single-digit growth in Europe and flat to low single-digit decline in North America. This guidance excludes items affecting comparability and is currency-neutral.

The company now expects strong free cash flow of approximately $900 million and capital expenditures of approximately $1 billion. Interest expense is expected to decline. The effective tax rate for 2010 is expected to be approximately 26%.

Transaction with the Coca-Cola Company
The previously announced transaction with The Coca-Cola Company is on track to close in 4Q 2010. As disclosed, The Coca-Cola Company will acquire CCE's North American business. At the same time, CCE's European operations will be split-off and will acquire The Coca-Cola Company's bottling operations in Norway and Sweden. The transaction has moved forward in several key areas. CCE received positive notification from the European Commission in May and recently executed an amendment to CCE's credit facility that will support the separation of the North American and European businesses. Key remaining steps include completing the Securities and Exchange Commission's review of the registration statement for the transaction, a ruling by the Internal Revenue Service, and antitrust approvals in the U.S. and Canada. In addition, shareowner approval is required and we will announce a meeting of shareowners for this purpose at a later date.

After completing the transaction, CCE expects to repurchase approximately $1 billion of its shares within the following 18 months and pay an expected annual dividend of $0.50 per share, all subject to the approval by CCE's board of directors. These plans may be adjusted depending on economic, operating, or other factors.

At close, new CCE anticipates having approximately 350 million fully diluted shares outstanding and net debt of approximately $2 to $2.5 billion. We expect to have financing in place by the end of the third quarter. We will provide a more detailed update on the outlook for new CCE later this year.

From the July 29, 2010, Prepared Foods' Daily News
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