OVERVIEW

Coca-Cola Enterprises Inc. ("we," "our," or "us") is the world's largest marketer, producer, and distributor of nonalcoholic beverages. We market, produce, and distribute our products to customers and consumers through license territories in 46 states in the United States (U.S.), the District of Columbia, the U.S. Virgin Islands and certain other Caribbean islands, and the 10 provinces of Canada (collectively referred to as North America). We are also the sole licensed bottler for products of The Coca-Cola Company (TCCC) in Belgium, continental France, Great Britain, Luxembourg, Monaco, and the Netherlands (collectively referred to as Europe). Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and accompanying Notes in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2008 (Form 10-K).

We operate in the highly competitive beverage industry and face strong competition from other general and specialty beverage companies. Our financial results, like those of other beverage companies, are affected by a number of factors including, but not limited to, cost to manufacture and distribute products, general economic conditions, consumer preferences, local and national laws and regulations, availability of raw materials, fuel prices, and weather patterns.

Sales of our products tend to be seasonal, with the second and third quarters accounting for higher unit sales of our products than the first and fourth quarters. In a typical year, we earn more than 60 percent of our annual operating income during the second and third quarters of the year. Sales in Europe tend to experience more seasonality than those in North America due, in part, to a higher sensitivity of European consumption to weather conditions. The seasonality of our sales volume combined with the accounting for fixed costs, such as depreciation, amortization, rent, and interest expense, impacts our results on a quarterly basis. Additionally, year-over-year shifts in holidays and selling days can impact our results on a quarterly basis. Accordingly, our results for the third quarter and first nine months of 2009 may not necessarily be indicative of the results that may be expected for the full year ending December 31, 2009.

For reporting convenience, our quarters close on the Friday closest to the end of the quarterly calendar period. The following table summarizes the number of selling days for the periods presented (based on a standard five-day selling week):

                          First    Second     Third    Fourth       Full
                         Quarter   Quarter   Quarter   Quarter      Year
                2009          67        65        65        64       261
                2008          64        65        65        68       262

                Change         3        -         -         (4 )      (1 )

Relationship with The Coca-Cola Company

We are a marketer, producer, and distributor principally of products of TCCC with greater than 90 percent of our sales volume consisting of sales of TCCC products. Our license arrangements with TCCC are governed by licensing territory agreements. TCCC owned approximately 35 percent of our outstanding shares as of October 2, 2009. Our financial results are greatly impacted by our relationship with TCCC. Our collaborative efforts with TCCC are necessary to (1) create and develop new brands and packages; (2) market our products in the most effective manner possible; and (3) find ways to maximize efficiency. For additional information about our transactions with TCCC, refer to Note 5 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q and Note 3 of the Notes to Consolidated Financial Statements in our Form 10-K.

Financial Results

Our net income in the third quarter of 2009 was $247 million, or $0.50 per diluted common share, compared to net income of $214 million, or $0.44 per diluted common share, in the third quarter of 2008. The following items that are included in our reported results affect the comparability of our year-over-year third quarter financial results:

Third Quarter 2009

• a $24 million ($19 million net of tax, or $0.04 per diluted common share) charge related to restructuring activities to streamline and reduce the cost structure of our global back-office functions and to support the integration and optimization of our supply chain; and

• a $17 million ($12 million net of tax, or $0.03 per diluted common share) net mark-to-market gain related to non-designated hedges associated with underlying transactions that will occur in a future period.

Third Quarter 2008

• a $19 million ($8 million net of tax, or $0.01 per diluted common share) charge related to restructuring activities to streamline and reduce the cost structure of our global back-office functions; and

• a $4 million ($0.01 per diluted common share) net tax expense related to tax rate changes.

Financial Summary

Our financial performance during the third quarter of 2009 was impacted by the following significant factors:

• Improved operating performance in North America highlighted by positive margin expansion driven by price-package architecture initiatives, enhanced operating efficiency, and a moderating cost environment;

• A 10.0 percent volume decline in North America versus strong Olympic-related promotional driven volume in the third quarter of 2008;

• Solid operating results in Europe driven by balanced volume and pricing growth, strong marketplace execution, and moderating cost trends that resulted in year-over-year costs remaining flat;

• Continued strong performance of Coca-Cola Zero throughout our territories, and the benefit of recent product additions including Monster Energy drinks in all of our territories, vitaminwater 10 in our U.S. territories, and Schweppes Abbey Well mineral water in Great Britain;

• Reduced delivery costs in North America due to lower fuel prices;

• The benefits of our Ownership Cost Management (OCM) practices, which reduced operating expenses and allowed us to reinvest in the marketplace; and

• Unfavorable currency exchange rate changes that reduced earnings per diluted common share in the third quarter of 2009 by approximately $0.04 versus the third quarter of 2008.

North America Results

In North America, we achieved net pricing per case growth of 7.5 percent primarily through sparkling beverage rate increases implemented in the latter part of 2008 and early 2009 and a slight positive mix shift associated with higher-priced still beverages. Our North American sales volume declined 10.0 percent versus strong Olympic-related promotional driven volume in the third quarter of 2008. In addition to the difficult prior year comparison, our sales volume in the third quarter of 2009 was negatively impacted by (1) the shifting of Fourth of July holiday volume into the second quarter of 2009; (2) higher sales prices for our multi-serve sparkling beverages; (3) persistent weakness in higher-margin packages and channels and lower than expected performance for some higher-margin emerging beverage categories; and (4) significantly lower sales of Dasani. Despite the overall reduction in volume during the third quarter of 2009, we benefited from the continued strong performance of Coca-Cola Zero, price-package architecture initiatives such as our 18 and 20-pack can configurations and 14 and 16-ounce PET (plastic) bottles, go-to-market innovations such as Boost Zones, and recent product additions including Monster Energy drinks and vitaminwater 10. Our bottle and can cost of sales per case increased 3.5 percent during the third quarter of 2009, reflecting the lowest quarterly year-over-year increase in more than two years. The moderating cost environment reflects reduced costs for several key raw materials, including aluminum and PET (plastic).

Europe Results

In Europe, we achieved volume growth of 4.0 percent as we were able to successfully lap strong volume in the third quarter of 2008. Our volume performance reflects solid growth in both sparkling and still beverages, which grew 4.0 percent and 2.5 percent, respectively. Continental Europe experienced strong growth during the quarter, with sales volume increasing 5.5 percent, while Great Britain grew modestly. Solid marketplace execution and the continued success of our "Red, Black, and Silver" three-cola strategy were the primary drivers of our third quarter of 2009 volume performance. Our volume in Europe also benefited from the recent addition of several products, including Monster Energy drinks across all of our European territories and Schweppes Abbey Well mineral water in Great Britain. Our net pricing per case grew 4.5 percent during the third quarter of 2009, while our bottle and can cost per case were flat. Our European results were significantly impacted by negative currency exchange rate changes.

OPERATIONS REVIEW

The following table summarizes our Condensed Consolidated Statements of
Operations data as a percentage of net operating revenues for the periods
presented:



                                                       Third Quarter         First Nine Months
                                                      2009       2008        2009          2008
Net operating revenues                                100.0 %    100.0 %      100.0 %      100.0 %
Cost of sales                                          61.1       63.2         61.9         63.2

Gross profit                                           38.9       36.8         38.1         36.8
Selling, delivery, and administrative expenses         30.5       29.3         30.6         30.3
Franchise impairment charge                             0.0        0.0          0.0         31.9

Operating income (loss)                                 8.4        7.5          7.5        (25.4 )
Interest expense, net                                   2.5        2.5          2.7          2.6
Other nonoperating income, net                          0.0       (0.2 )        0.0          0.0

Income (loss) before income taxes                       5.9        4.8          4.8        (28.0 )
Income tax expense (benefit)                            1.4        1.1          1.2        (10.2 )

Net income (loss)                                       4.5 %      3.7 %        3.6 %      (17.8 )%

Operating Income (Loss)

The following table summarizes our operating income (loss) by operating segment
for the periods presented (in millions; percentages rounded to the nearest 0.5
percent):



                                                       Third Quarter                                        First Nine Months
                                              2009                       2008                       2009                        2008
                                                   Percent                    Percent                    Percent                     Percent
                                      Amount       of Total      Amount       of Total      Amount       of Total       Amount       of Total
North America                         $   279          60.0 %    $   273          63.5 %    $   858          68.5 %    $    711          17.0 %
Europe                                    314          68.0          265          61.5          797          63.5           723          17.5
Corporate                                (129 )       (28.0 )       (108 )       (25.0 )       (401 )       (32.0 )        (345 )        (8.5 )
Franchise impairment charge(A)             -            0.0           -            0.0           -            0.0        (5,279 )      (126.0 )

Consolidated                          $   464         100.0 %    $   430         100.0 %    $ 1,254         100.0 %    $ (4,190 )       100.0 %

(A) During the second quarter of 2008, we recorded a noncash franchise license impairment charge in our North American operating segment. For additional information about the noncash franchise license impairment charge, refer to Note 2 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

Operating income increased $34 million, or 8.0 percent, during the third quarter of 2009 to $464 million from $430 million in the third quarter of 2008. During the first nine months of 2009, we had operating income of $1.3 billion, compared to an operating loss of $4.2 billion during the first nine months of 2008. The following table summarizes the significant components of the change in our operating income (loss) for the periods presented (in millions; percentages rounded to the nearest 0.5 percent):

                                                Third Quarter 2009            First Nine Months 2009
                                                              Change                           Change
                                                             Percent                          Percent
                                               Amount        of Total         Amount          of Total
Changes in operating income (loss):
Impact of bottle and can price, cost, and
mix on gross profit                           $    275           64.0 %     $      655            15.5 %
Impact of bottle and can volume on gross
profit                                            (144 )        (33.5 )           (177 )          (4.0 )
Impact of bottle and can selling day shift
on gross profit                                     -             0.0               69             1.5
Impact of Jumpstart funding on gross
profit                                              (4 )         (1.0 )            (17 )          (0.5 )
Impact of post mix, non-trade, and other
on gross profit                                    (19 )         (4.5 )              7             0.0
Selling, delivery, and administrative
expenses                                           (52 )        (12.5 )           (237 )          (5.5 )
Franchise impairment charge                         -             0.0            5,279           126.0
Net impact of restructuring charges                 (5 )         (1.0 )            (27 )          (0.5 )
Net mark-to-market gains related to
non-designated hedges                               17            4.0               17             0.5
Currency exchange rate changes                     (32 )         (7.5 )           (125 )          (3.0 )
Other changes                                       (2 )          0.0               -              0.0

Change in operating income (loss)             $     34            8.0 %     $    5,444           130.0 %

Net Operating Revenues

Net operating revenues decreased 3.0 percent in the third quarter of 2009 to $5.6 billion and 0.5 percent in the first nine months of 2009 to $16.5 billion. These changes include currency exchange rate reductions of approximately 3.0 percent and 5.5 percent in the third quarter and first nine months of 2009, respectively. The percentage of our third quarter of 2009 net operating revenues derived from North America and Europe was 69 percent and 31 percent, respectively.

During the third quarter of 2009, our net operating revenues in North America declined 4.0 percent. This decline was driven by a 10.0 percent reduction in sales volume, offset partially by strong pricing growth. In Europe, our net operating revenues declined 1.0 percent, including a 9.5 percent negative impact of currency exchange rate changes. Our European revenues benefited from balanced volume and pricing growth that was driven by strong Coca-Cola trademark volume performance, solid marketplace execution, and successfully lapping strong volume in the third quarter of 2008.

Net operating revenues per case increased 3.5 percent in the third quarter of 2009 versus the third quarter of 2008 and 1.5 percent in the first nine months of 2009 versus the first nine months of 2008. The following table summarizes the significant components of the change in our net operating revenues per case for the periods presented (rounded to the nearest 0.5 percent and based on wholesale physical case volume):