Coca-Cola Enterprises Inc. Reports Second-Quarter 2008 Results

Atlanta, Jul. 17 - Coca-Cola Enterprises today reported a second-quarter 2008 net loss of $3.2 billion, or $6.52 per diluted share, including a non-cash pre-tax impairment charge of $5.3 billion, or $7.06 per diluted share after tax and previously announced restructuring charges of 2 cents per diluted share.

The non-cash impairment charge is the result of CCE’s impairment analysis in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” The charge is necessary to reduce the book value of the company’s North American franchise license intangibles to their estimated fair value in light of an expected near term decline in operating income and a recent decline in CCE’s stock price – both largely the result of deteriorating North American macroeconomic conditions and expected substantial increases in commodity costs.

Excluding these charges, comparable second quarter earnings per diluted share were 56 cents driven by volume and operating income declines in North America, modest operating income growth in Europe, and favorable tax and currency exchange rates.

The following table provides a reconciliation of reported and comparable earnings per diluted share:

“Over the past two years, we have implemented a new, global operating framework that is strengthening our company,” said John F. Brock, chairman and chief executive officer. “In North America, we have developed a stronger brand portfolio through the addition of glacéau, Fuze, and Campbell’s, and heightened efficiency and effectiveness through new programs, including initiatives to transform our go-to-market model. In Europe, we improved our operating approach thereby creating efficiencies that have contributed to Europe’s ability to deliver performance in-line with our expectations during the first half of 2008.

“Our operating framework and its destination remain the right long-term vision for CCE. As we undertook these extensive changes, we recognized our North American business had fundamental issues that needed to be addressed to achieve our long-term growth objectives,” Mr. Brock said. “We targeted the 2008-2010 period to make the substantial changes required to resolve these challenges, which include improving profitability on future consumption packages, addressing multi-year margin compression, and recruiting new consumers to the sparkling beverage category.

“Continued significant declines in the North American economy, coupled with unprecedented escalating commodity costs, are negatively impacting our results and restricting our outlook for near term growth. This creates an immediate need to accelerate substantive operating changes in our business,” said Mr. Brock.

“As a result, we are taking action including establishing pricing levels that cover input costs, strengthening execution, restoring growth to immediate consumption by recruiting new consumers, and reducing operating expenses,” Mr. Brock said. “One immediate step is to implement, post-Labor Day, a price increase targeted at future consumption packages in the United States. This will improve our financial performance and further our efforts to balance value and volume across packages and channels.

“In addition, we have initiated a 120-day review to evaluate how best to accelerate and expand the scope and pace of change in key operating areas and will look at fundamental issues and opportunities including our system supply chain, operations, and price-package architecture and put into motion the essential changes required to drive long-term profitable growth and shareowner value in North America. This work requires continued cooperation with The Coca-Cola Company as we work together to improve the long-term outlook for our North American business over the coming months,” said Mr. Brock.

SECOND QUARTER PERFORMANCE

In the second quarter, North American volume declined 1½ percent. This result reflects persistent weakness in sales of higher margin 20-ounce packages of sparkling beverages and Dasani, a low single-digit decline in future consumption sales, the benefits of glacéau brands, and continued strong growth in Coca-Cola Zero. On a currency-neutral basis, pricing per case grew 4 percent and cost of goods per case increased 7½ percent. Both pricing and costs were affected by the mix impact of increased sales of purchased finished goods. On a comparable and currency-neutral basis, operating expenses grew 1½ percent.

European volume declined 1 percent in the second quarter, affected negatively by the impact of a two-week labor disruption in France and offset by the benefits of the activation for the Euro 2008 soccer event. In Great Britain we achieved modest growth on the strength of a mid single-digit increase in brand Coca-Cola. On the continent, Coca-Cola Zero achieved solid growth in the quarter despite lapping introductory volume from a year ago. Pricing per case grew 2½ percent, cost of goods per case rose 2 percent, and operating expenses grew 1 percent. These results were in-line with expectations and are comparable and currency-neutral.

FINANCIAL OUTLOOK

Management now expects full year comparable 2008 earnings per diluted common share to be in the range of $1.40 to $1.45. Including currency benefit, full year operating income will decrease in a low single-digit range, with solid growth in Europe and a decline in North America in the low teens. The company now expects full year free cash flow from operations less capital spending of approximately $675 million, with capital spending of approximately $1 billion. The comparable effective tax rate for 2008 is expected to be approximately 25 percent to 26 percent. Guidance excludes items affecting comparability and includes expected currency translation impact.