At this time, I would like to welcome everyone to The Coca-Cola Company's first quarter 2013 earnings results conference call. Today's call is being recorded. If you have any objections, you may disconnect at this time. All participants will be in a listen-only mode until the formal question-and-answer portion of the call. (Operator Instructions). Due to the interest in this call, we request a limit of one question per person. I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's Media Relations department, if they have questions. I would now like to introduce Jackson Kelly, Vice President and Investor Relations Officer. Mr. Kelly, you may begin.

Good morning, and thank you for being with us today. I am joined by Muhtar Kent, our Chairman and Chief Executive Officer and Gary Fayard, our Chief Financial Officer. Following prepared remarks by Muhtar and Gary this morning, we will turn the call over for your questions. Ahmet Bozer, President of Coca-Cola International, Steve Cahillane, President of Coca-Cola Americas and Irial Finan, President of our Bottling Investments Group will also be available for our Q&A session. Before we begin, I would like to remind you that this conference call may contain forward-looking statements including statements concerning long-term earnings objectives and should be considered in conjunction with cautionary statements contained in our earnings release and in the company's most recent periodic SEC report. In addition, I would also like to note that we have posted schedules under the financial reports and information tab in the Investors section of our company website, at www.coca-colacompany.com. These schedules reconciles certain non-GAAP financial measures which may be referred to by our senior executives during this morning's discussion to our results as reported under generally accepted accounting principles. Please look on our website for this information. Now, let me turn the call over to Muhtar.

Thank you, Jackson and good morning, everyone. Before we review this quarter's operating results, I would like to take a moment to acknowledge the senseless events that took place in Boston yesterday. We were deeply saddened by this news and our thoughts and prayers are with those affected by this horrible tragedy. Now turning to this quarter's results. We are pleased with our first quarter performance. The great women and men of The Coca Cola Company, Coca Cola system delivered solid performance results in line with our expectations. On a global basis, we once again gained value share. We have now gained global value share in nonalcoholic ready-to-drink beverages for 23 consecutive quarters. In spite of a challenging global economic times of the last few years, our people and our system bottling partners are executing the right strategies to advance us further towards our 2020 vision. Since the launch of our 2020 vision at the beginning of 2010, we have increased daily servings by more than 225 million, we have lifted global volume and value share to the highest levels since 2003, and more than $48 billion have been added to the Coca-Cola Company's market capitalization. Across the system, we are continuing to invest together for a better tomorrow. In fact, we enter 2013 and the fourth year of our journey to 2020 from a position of real strength clearly focused and well on track to reach our goals and objectives and our global bottling system is healthier than ever before. The strength of our brands and the promise of sustainable growth are fueling our bottlers' efforts to become more efficient, improve capability and further strengthen execution. We are working closely with our bottling partners around the world to rapidly realize opportunities to execute with precision and to continue winning…

Thanks, Muhtar, and good morning everyone. We delivered solid results this quarter underscoring once again that our company and global system are well positioned to execute our strategic plans and alignment with our 2020 vision. Achieving such consistent performance during a time of ongoing macroeconomic uncertainty is a real testament to the strength of our global system and the investments we continue to make for long-term sustainable growth. Before we get into the financial details of the quarter, let me remind you that we closed the sale of 51% of our bottling business in the Philippines to Coca-Cola FEMSA in January of this year and therefore we no longer are consolidating the Philippines results. We anticipate that this transaction along with the previously announced, bottling merger in Brazil will have a 3% structural impact on our full year 2013 net revenues, likewise our full year operating results should see a 1% structural impact. However, there should be a corresponding improvement to equity income, to our share of the results of these operations moving forward. As I shared in our 2012 year-end call, we do not expect these transactions to have a material impact on our 2013 earnings results. Moving now to our first quarter results, our comparable earnings per share were $0.46, up 5% versus the prior year quarter despite currency headwinds of approximately 4%. Our comparable currency-neutral operating income was up 5% despite the impact of two fewer selling days and the impact of certain structural items. Currency was a 3% headwind on top on comparable operating income. Comparable currency neutral net revenue grew 1% and grew 2% after adjusting for the impact of structural items. After adjusting for the effects of two fewer selling days in the quarter, unit case sales were in line with concentrate sales. Price…

(Operator Instructions) Your first question is from John Faucher with JPMorgan Chase. Mr. John, you can continue with your question.

Sorry, there is a lot of static. As you look at the bottler consolidation piece, is Spanish or Japanese bottler consolidation the beginning of the next wave of let's say a bottler-driven consolidation? And how much are you pushing this as opposed to letting the bottlers lead where the system is going?

Hi, John, good morning. This is Muhtar. First, I think, its important to realize that there is not one model for the world. There is many different models for the world. As you can see, what's happening. This has been an exciting last several months with respect to the evolution, actually continuous evolution of our franchise system. We manage our business to create sustainable long-term value and evolution of our franchise system continues to play an absolutely critical role in that process. So what you have seen recently, the Contal merger in Japan, the Brazil merger of three bottling partners creating a large Brazilian led bottling business, the Iberian merger of seven bottling partners in Iberia, the sale of the Philippines, of the majority shares of the Philippines and the control to FEMSA, and now the U.S. the process, the journey starting in the United States are all part of our vision, our plan and to ensure that we can continue to deliver on the commitments we made for our vision. In some cases they use, partially, our capital. In some cases whether the sale of, obviously, we bring capital back into the Coca-Cola Company, but all the time ensuring that our bottling business is fully suited with the needs of 21st century delivering what is necessary ahead of consumer expectations, customer expectations and so not one-size-fits-all. And in the case of the United States, again, we are pleased to report today that we have reached agreement in principle to start this journey. All along since the first day we've closed the transaction of the Coca-Cola Refreshments, I have always said there will be a meaningful role to invite partners back into the business. When we were asked about the timing, we've always said around the four-to-five year timeframe from the time we've closed - the close of Coca-Cola Refreshments was you will recall back in the latter part of 2010, and we are well within that timeline and it's a continuous evolution and sometimes it will necessitate for us to use our own capital, sometimes the mix and sometimes no capital and again not one-size-fits-all. The U.S. model is a very different, but it is again a model that invites partners to serve with us passionately, the communities that we operate in.

Great. If I could just as a follow-up on that, which would be as you look at the different options you gave for the U.S. pieces here in terms of sub-bottler agreements, asset sales, swaps, things like that, is there some way to think about the financial impact as you do this? I mean, this is a small piece of it. How long does this timeframe take out as you sort of push these U.S. pieces out? Thanks.

Yes. I think we can't comment on the timing for the end game but all I can tell you is that we are intent on creating the evolution necessary for us to be able to serve both, our large customers and small independent customers in the best possible way with our bottling partners. Again, we have always said right from the beginning and we are consistent to that that the U.S. will be slightly different. We want to create the best-in-class production, optimum cost production system coast-to-coast from the east to the west. That will be nationally managed. We also want to create a national, we managed a larger customer, management system that will essentially have the responsibility to put together of 21st century customer plan with our large partners in the United States, or at the same time invite partners to come in and be part of this new evolution in the United States. It will take as long as it is necessary, and that is not our focus; it's going to be about doing the right thing as quickly as possible, as efficiently as possible and as effectively as possible and that's what we are going to be doing.

Thank you. Your next question comes from Bryan Spillane of Bank of America.

Hi, good morning. A question for you, Gary, just on the on the operating leverage in the in the first quarter and maybe more specifically the gross margin. If I understood it right, this quarter would have been one of the highest in terms of the impact from commodity inflation and we also really had no positive benefit from price mix. And as we kind of look out going forward, right? We should get some benefit from price mix later in the year and maybe you some relief on commodity inflation. So, why would not there be maybe more leverage going through the year than we originally expected given the leverage you had in the first quarter?

Yes, Bryan, thanks. There are a couple of things to consider. First is, as I mentioned previously in the prepared remarks, that we reversed some compensation accruals in the first quarter. So that gave you more leverage in the quarter but you will not see that that’s more of one-time impact, if you will. So its more leveraged in the quarter. The other significant piece is, the currencies had an impact as well and currencies are moderate going out. But the biggest thing will be geographic mix. We would expect to see geographic mix changing throughout the year as we go through the year. As that happens, it will have an impact on gross margin and operating leverage.

So the geographic mix would be more negative going through the back half of the rest of the year?

Yes, that’s exactly right. In fact, think about North America. Actually I would expect North America, actually, in the first quarter of this year, North America's operating income on a recurring comparable basis was down 3% and it is down 3% primarily because of two fewer selling days. So if you adjusted for those selling days it would have been positive. But I would expect North America to actually improve versus where they were, minus 3%, but as they improve because it's a finished products business, it is going to have a negative gross margin impact and there will be reduced leverage.

Okay, so more growth from lower margin geographies going forward and that will affect that margin impact?

That is what I was trying to say, more in code than the prepared remarks.

All right, thank you.

We normally don't think North America, but that’s what it was.

Your next question comes from Dara Mohsenian with Morgan Stanley.

Good morning. I was hoping you can update on the competitive environment around the world both in China and Western Europe which have been hotspots recently. Also, just your thoughts around how you manage the pricing environment in the U.S. Sparkling business in 2013 and beyond in light of the moderate commodity pressure and if that solid 3% sparkling growth we saw in Q1 can continues in the balance of the year?

This is Muhtar. We haven’t seen anything markedly different from previous quarters as far as the competitive environment is concerned. China remains a very competitive environment. Actually the whole world, and again this is a competitive environment that is the mix of large international companies but also very much local companies in Asia, in parts of Africa, in the Middle East. We also see a somewhat more rational pricing,-particularly, in Europe as well as other parts of the world, in Latin America too. So the way we see the environment is it will continue to be challenged from a consumer perspective. Whether you are talking about Asia coming back or whether you are talking about consumer sentiment in Europe will continue to be volatile and mixed at best, and therefore pricing is going to critical and therefore also ensuring leverage and ensuring productivity that can be generated out of operations for us to be able to continue to invest. It's going to be critical. But we are intent on continuing to invest in this environment. I will let Steve Cahillane talk a little bit about how we manage the pricing environment in the United States (inaudible) Price mix, 3%, in terms of a leverage in pricing for sparkling beverages in the past quarter.

Thanks, Muhtar. We have seen a rational pricing environment in the United States over the course of a good period of time right now. We would expect that to continue. I have said many times that if commodities go down, don’t look for us to reinvest that in price. We have worked very hard to earn the price that we take in the marketplace. We don’t have an affordability problem in the United States with our sparkling beverages. We would love to continue to invest behind our brands. We have got a terrific summer program for the Coca-Cola brand. We have got an exciting new partnership with Taylor Swift around Diet Coke. We will invest around activating those types of programs that continue to focus on one of our most important objective which is to continue to support, development and drive our sparkling category inside the United States business.

Okay. Great. Thanks.

Your next question comes from Bill Pecoriello of Consumer Edge Research

Good morning, everybody. I wanted to follow up on the U.S. filing announcement. Onto the production assets for the territories the five bottlers picked up. Do you see these bottlers eventually contributing to manufacturing assets into a national production company to get at the cost savings opportunity that you talked about in the manufacturing side? And also, would Coke be willing to let new partners bringing outside capital to help finance some of the additional territory sales given the size of the territory that Coke still holds onto in the U.S.? Thanks.

Hi, Bill. This is Muhtar. Good morning. I'd say to you that this is again, we are at the beginning of this journey. We have reached agreement in principle with these five U.S. bottling partners. It is very important that we did reach that agreement in principle and now we can actually ensure that we put all the details into motion and we can implement effectively. We have always said production in the United States is critical to our success in achieving a optimum cost 21st century production system nationally manage, coast-to-coast. That is going to take place. We've also said that managing large, 30 or so of our largest customers in the United States as going to be done nationally. That's also going to take place. In terms of who else would be coming in, can't comment on that in terms of what will happen and what form and architecture production is going to take place in terms of what our current bottlers own. I can't comment on that. All I can tell you and I can assure you that we are intent on ensuring that we make the necessary changes in the format and architecture production to achieve what I just said which is a coast-to-coast nationally run production system that generates the efficiencies, synergies, productivity that allow us to continue to win in the marketplace. And again, there may be a future where our partners in the United States take certain ownership in the national production. I wouldn't rule that out also, but it will be managed nationally from one point, single point.

Great. Thank you.

Your next question comes from Judy Hong of Goldman Sachs.

Thanks. Good morning. I just had a couple of questions on North America. First, in terms of volume performance, I think the macro data points and consumer data points have been a little bit choppy more recently. So maybe if you can give us a little bit color just in terms of category of your performance, immediate consumptions versus take home, and so do the expectation as you get out into the back half of the year lapping up some of the transitory headwinds whether it's in payroll taxes or weather related if you expect volumes performance to improve? Then, Gary, just on the profitability in North America, I know you talked about this a little bit, but I look at first quarter, you had 1% volumes growth, 2% price mix and you did say profitability was up a little bit, but why aren't we seeing the profitability really improve more meaningfully and sort of what drives the sequential acceleration in North America profitability going forward?

Okay. Judy, I'll have Steve answer the first part of your question before Gary comes in and sheds some light on the question on profitability. Steve?

Yes. Thanks, Judy. First quarter clearly had a lot of a noise in it. We expected a benefit from Easter being in the first quarter. It's never as big a benefit when it comes that early in the year. Easter is always better when it comes later in April, because of the warmer weather, but obviously you referenced the weather. We saw some very dramatic changes. Last year, we benefited from one of the hottest winters, warmest winters in the United States, and we cycled that with one of the coldest winters in the United States. So, clearly, that had an effect and we saw any benefit from Easter really being washed away, if you like, by the poor weather. There was clearly an effect in the payroll tax. It's a little bit of art and science trying to pick apart what's weather and what's payroll tax. We would figure about two thirds is probably weather-related and one-third of the slowdown is based on the economy. We are go optimistic. Guardedly optimistic that the consumers are coming back. That the payroll tax and the economy is kind of a short-term need to get used to the discretionary impact that it has had. So we remain optimistic that we have got the right programs in place, that the economy is on the mend and we would expect continued good performance as we go out the next three quarters. In terms of question of profitability, I will turn it over to Gary.

Judy, I would say a couple of things on profitability. Its really kind of repeating what Steve just said. If you take the first quarter and you throw in lousy weather, payroll tax, actually the price of gasoline, what then does to your immediate consumption versus future consumption business is going to have an impact on your profitability. Now, if I go back to the answer I gave to Brian earlier though, when I saw that geographic mix that is North America, I would expect North America to be improving actually from the first quarter and from where we were. Then North America also has this two fewer days. Now, I can tell you, Steve has got a number from minus 3%. I say it would have been positive. Steve has got a number but you can calculate it several different ways as to what would the impact of the two days be. We would all agree, I think, it is positive. They would have been positive as to operating income line. But you put all that together, the weather, by the way is as lousy as it has been and the impact on Steve's business has been given a lot of moisture to the Midwest for the drought for the corn crop. So they look for commodities and we will see what happens there. Payroll taxes, consumers hopefully are starting to get used to it. Gasoline prices, looks like they are starting to trend down somewhat. So I think there is some reason to be cautiously optimistic. CCR continues to execute with excellence and continue to improve capability. So I think the there are lots of reasons to be optimistic on North America.

Okay, but from a profitability perspective, though, the bigger delta is really the mix shifting towards more immediate consumption as weather normalizes? Or is there a step up in cost savings or timing of marketing investments that help the profitability?

Judy, I would actually say, the biggest impact on the first quarter North America was two less selling days by far, and the whole company as well. But by far, the biggest impact was the two selling days.

Okay.

Judy, I can answer this part of your question. The secondary impact is clearly weather impacted food service and immediate consumption more than the take home channel. So we would expect as weather moderates, those profitable parts of our business will start to normalize as well. But as Gary said, two less selling days when you got the fixed cost assets that we have in the North American business is really quite significant. Those extra two days are golden cases that are going out and when you lose those two days, it obviously has a big impact.

Got it, okay. Thank you very much.

Your next question comes from Caroline Levy of CLSA.

Good morning, Muhtar, Gary and team. I would like to just understand, Muhtar, your vision, again going back to the United States. You talked a little bit about how manufacturing is going to evolve. A little bit of understanding the benefits of margin the operations of food service, your noncarbs and your CSCs into one production facility. Just can that actually be done and are there synergies there? Then secondly, do you feel strongly that your own people have to get the product to market from the plant or could you use a third-party, such as assister?

Yes, Caroline, I think first in terms of our capability in our system in the United States is, I would say, the best in the consumer products world in terms of how we go to market and how we can get the product from production facilities. So I wouldn't like to comment on how we can improve that. If there is a way for us to even improve and generate more productivity we will certainly look at it. I think the most important thing though is that there is room to generate significant further synergies in production. I think today I wouldn’t say that the United States production system after three years of having integrated Coca-Cola Refreshments, it is where we needed to be and we need to continue on that roadmap to proceed towards a modern and best-in-class optimum cost production system coast-to-coast. That will mean obviously a lot of changes, that will mean building new plants, that will mean combining some facilities, but I would like to also comment in terms of hot-fill and aseptic versus sparkling beverage plants, we will look at ensuring that we have the most modern, most productive facilities in place. I don't believe the answer is to combine all under one roof. I think the answer is to combine many that are scattered across the country both, in terms of still and sparkling separately into some consolidation process and I can't comment any further. What I can tell you is that there is room for cost to come down, there is room for efficiencies to increase and we will achieve all of those. This is all in line with our 2020 vision. We laid out a plan, when we took over the business of Coca-Cola Enterprises, we laid out a plan when I took over as the CEO back four and a half years ago and we are executing it meticulously and we are doing what we have said we would do and we are doing it ahead of time.

That's excellent. I was just wondering in terms of getting shelf space, you see a big opportunity in up and down the street and to get better pricing much as you've done in Lat-Am. I'm often asked how you compete with all the new things that come in, be it, coconut water, energy drinks. I know you have some, but are you convinced you can keep or improve shelf space for your carbonated soft drinks?

Absolutely. I think, we can improve service levels. I think, we can improve execution inside the point of sale. I think, we can improve availability. I think, we can improve availability of cold drink. I think, we can improve how we serve independent, and all of those things are going to be played out as we implement and execute this new strategy in the United States. And, I don't know, Steve, do you want to comment?

No. I agree completely and part of what we are doing with this new bottler arrangement focuses on that up and down the street where bottlers and CCR add the most value which is not only big customer sales, but up and down the street execution and we have got also our venturing and emerging brands unit which you are familiar with which brings brands like Zico coconut water. It brought Honest Tea. So, in that, those spaces that you are talking about we are very much innovating, we've got glaceau fruitwater which we just launched with great success a couple of weeks ago. That's being executed not only in the large stores, but importantly in the up and down the street foodservice, on-premise accounts as well, so we see that as a very important capability. We see ourselves as having a competitive advantage there when it comes to not just shelf space, but cold drink space and overall availability.

Yes. And just to finally add on to that point, Caroline, the rest assured we are in an mode of evolution, rapid evolution, not just in the United Sates, across the whole world, and you will see us adapting, reinventing, how we go to market, how we serve customers and also how we communicate with consumers, very importantly. Our brands are at an all time high in terms of health and we will continue again to evolve and bring out the best modes of communications with our consumers as well.

Thank you. Your next question is from Mark Swartzberg with Stifel Nicolaus.

Yes. Thanks, good morning, everyone. Also a question on the U.S. refranchising, Muhtar or Gary, you talk about this new beverage agreement being ultimately what's at Play here. Could you speak a little bit to how you are thinking about that and the role of incidence-based pricing in that? Is it right to think that continues to have prominence in this new agreement? Any distinction you might draw between how stills and carbonates are treated as you move production more squarely to staying, if you will, at least for a little while inside Coca-Cola?

Yes, I think Mark, we can't comment on the detail. What we can say is that it will be a model that will align us fully with our bottling partners to do what is right in the marketplace and to focus on what is right in the marketplace, a full alignment model and I think I can't just comment any further than that but you will see us executing better, serving the customers better with a better production template, as well as a customer service template.

Is it fair to think that other markets, there is a fact pattern and experience set to draw in as you implement this newer form of agreement here in the U.S.?

I think all of that will come into play, best practices, everywhere around the world. I am certain that in four or five years' time, many people will come into the United States to see the best practices as it used to be back in the 1980s when I used to bring new bottlers from Eastern Europe to see best practices in the United States at that time.

Fair enough. Thanks, Muhtar.

In closing, I would like to thank Gary, Ahmet, Steve, Irial and Jackson and to again say that we are pleased with our solid first quarter. We are working as a system to unlock real value, further strengthen execution and to win at the point-of-sale. We are confident that a relentless focus on growth will enable us to build capable, resilient optimized advantage and sustainable systems that are well-positioned to deliver results in 2013 and achieve our 2020 Vision. As always, we thank you for your interest and your investment in our company and for joining us this morning.

Thank you for participating in today's conference call with The Coca-Cola Company. Audio playback is available via the company's website, the coca-colacompany.com. You may now all disconnect.