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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 001-02217
The Coca-Cola Company
(Exact name of Registrant as specified in its Charter)
Delaware 58-0628465
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Coca-Cola Plaza 30313
Atlanta, Georgia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (404) 676-2121
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the
Registrant's classes of Common Stock as of the latest practicable
date.
Class of Common Stock Outstanding at October 30, 1998
--------------------- -------------------------------
$.25 Par Value 2,465,104,203 Shares
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<PAGE>
THE COCA-COLA COMPANY AND SUBSIDIARIES
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited) Page Number
Condensed Consolidated Balance Sheets
September 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income
Three and nine months ended
September 30, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 23
Part II. Other Information
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 27
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions except share data)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
CURRENT
Cash and cash equivalents $ 1,746 $ 1,737
Marketable securities 83 106
------------- ------------
1,829 1,843
Trade accounts receivable, less
allowances of $12 at September 30
and $23 at December 31 1,594 1,639
Inventories 900 959
Prepaid expenses and other assets 1,673 1,528
------------- ------------
TOTAL CURRENT ASSETS 5,996 5,969
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INVESTMENTS AND OTHER ASSETS
Equity method investments
Coca-Cola Enterprises Inc. 495 184
Coca-Cola Amatil Limited 1,096 1,204
Coca-Cola Beverages plc 918 -
Other, principally bottling companies 3,356 3,049
Cost method investments,
principally bottling companies 319 457
Marketable securities and other assets 1,512 1,607
------------- ------------
7,696 6,501
------------- ------------
PROPERTY, PLANT AND EQUIPMENT
Land 180 183
Buildings and improvements 1,474 1,535
Machinery and equipment 3,845 3,896
Containers 124 157
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5,623 5,771
Less allowances for depreciation 2,057 2,028
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3,566 3,743
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GOODWILL AND OTHER INTANGIBLE ASSETS 613 727
------------- ------------
$ 17,871 $ 16,940
============= ============
</TABLE>
3
<PAGE>
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions except share data)
LIABILITIES AND SHARE-OWNERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
CURRENT
Accounts payable and accrued expenses $ 2,863 $ 3,249
Loans and notes payable 3,933 2,677
Current maturities of long-term debt 2 397
Accrued income taxes 1,042 1,056
------------- ------------
TOTAL CURRENT LIABILITIES 7,840 7,379
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LONG-TERM DEBT 688 801
------------- ------------
OTHER LIABILITIES 942 1,001
------------- ------------
DEFERRED INCOME TAXES 540 448
------------- ------------
SHARE-OWNERS' EQUITY
Common stock, $.25 par value
Authorized: 5,600,000,000 shares
Issued: 3,455,057,379 shares at
September 30; 3,443,441,902
shares at December 31 864 861
Capital surplus 1,932 1,527
Reinvested earnings 19,694 17,869
Unearned compensation related to
outstanding restricted stock (46) (50)
Accumulated other comprehensive income (1,542) (1,314)
------------- ------------
20,902 18,893
Less treasury stock, at cost
(992,814,443 shares at September 30;
972,812,731 shares at December 31) 13,041 11,582
------------- ------------
7,861 7,311
------------- ------------
$ 17,871 $ 16,940
============= ============
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
4
<PAGE>
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In millions except per share data)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET OPERATING REVENUES $ 4,747 $ 4,954 $ 14,355 $ 14,167
Cost of goods sold 1,446 1,659 4,263 4,563
---------- ---------- ---------- ----------
GROSS PROFIT 3,301 3,295 10,092 9,604
Selling, administrative
and general expenses 2,064 2,052 6,062 5,776
---------- ---------- ---------- ----------
OPERATING INCOME 1,237 1,243 4,030 3,828
Interest income 56 50 171 150
Interest expense 72 58 209 188
Equity income 51 46 103 152
Gains on issuances
of stock by
equity investees 27 - 27 363
Other income (loss) - net (12) 224 211 566
---------- ---------- ---------- ----------
INCOME BEFORE
INCOME TAXES 1,287 1,505 4,333 4,871
Income taxes 399 494 1,397 1,559
---------- ---------- ---------- ----------
NET INCOME $ 888 $ 1,011 $ 2,936 $ 3,312
========== ========== ========== ==========
BASIC NET INCOME
PER SHARE $ .36 $ .41 $ 1.19 $ 1.34
========== ========== ========== ==========
DILUTED NET INCOME
PER SHARE $ .36 $ .40 $ 1.18 $ 1.32
========== ========== ========== ==========
DIVIDENDS PER SHARE $ .15 $ .14 $ .45 $ .42
========== ========== ========== ==========
AVERAGE SHARES
OUTSTANDING 2,464 2,478 2,468 2,479
========== ========== ========== ==========
Dilutive effect of
stock options 28 37 30 38
---------- ---------- ---------- ----------
AVERAGE SHARES
OUTSTANDING
ASSUMING DILUTION 2,492 2,515 2,498 2,517
========== ========== ========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
5
<PAGE>
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1998 1997
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,936 $ 3,312
Depreciation and amortization 471 450
Deferred income taxes 25 (57)
Equity income, net of dividends (52) (103)
Gains on issuances of stock by
equity investees (27) (363)
Foreign currency adjustments 57 63
Other items (178) (588)
Net change in operating assets
and liabilities (628) 730
------------ ------------
Net cash provided by operating activities 2,604 3,444
------------ ------------
INVESTING ACTIVITIES
Acquisitions and investments,
principally bottling companies (1,001) (789)
Purchases of investments and other assets (365) (268)
Proceeds from disposals of investments
and other assets 862 1,958
Purchases of property, plant and equipment (612) (776)
Proceeds from disposals of property, plant
and equipment 29 54
Other investing activities (37) 84
------------ ------------
Net cash provided by (used in)
investing activities (1,124) 263
------------ ------------
Net cash provided by operations after
reinvestment 1,480 3,707
------------ ------------
FINANCING ACTIVITIES
Issuances of debt 1,324 101
Payments of debt (409) (1,493)
Issuances of stock 196 109
Purchases of stock for treasury (1,459) (957)
Dividends (1,089) (695)
------------ ------------
Net cash used in financing activities (1,437) (2,935)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (34) (95)
------------ ------------
CASH AND CASH EQUIVALENTS
Net increase during the period 9 677
Balance at beginning of period 1,737 1,433
------------ ------------
Balance at end of period $ 1,746 $ 2,110
============ ============
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
6
<PAGE>
THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do
not include all information and notes required by generally accepted
accounting principles for complete financial statements. However,
except as disclosed herein, there has been no material change in the
information disclosed in the notes to consolidated financial
statements included in the Annual Report on Form 10-K of The Coca-Cola
Company (our Company) for the year ended December 31, 1997. In the
opinion of Management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended September
30, 1998, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
Certain amounts in our prior period financial statements have been
reclassified to conform to the current period presentation.
NOTE B - SEASONAL NATURE OF BUSINESS
Unit sales of soft drink and noncarbonated beverage products are
generally greater in the second and third quarters due to seasonal
factors.
NOTE C - COMPREHENSIVE INCOME
As of January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). The
adoption of this Statement had no impact on our net income or share-
owners' equity. SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components. SFAS 130 requires
foreign currency translation adjustments and unrealized gains or
losses on our Company's available-for-sale securities to be included
in other comprehensive income. Prior to our adoption of SFAS 130, we
reported such adjustments and unrealized gains or losses separately in
share-owners' equity. Amounts in prior year financial statements have
been reclassified to conform to SFAS 130.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE C - COMPREHENSIVE INCOME (Continued)
The components of comprehensive income, net of related tax, are as
follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 888 $ 1,011 $ 2,936 $ 3,312
Net change in
unrealized gain (loss)
on available-for-sale
securities (48) 32 (69) 23
Foreign currency
translation adjustment (81) (179) (159) (375)
---------- ---------- ---------- ----------
Comprehensive income $ 759 $ 864 $ 2,708 $ 2,960
========== ========== ========== ==========
</TABLE>
The components of accumulated other comprehensive income, net of
related tax, are as follows (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Unrealized gain (loss) on
available-for-sale securities $ (11) $ 58
Foreign currency translation
adjustment (1,531) (1,372)
------------- -------------
Accumulated other comprehensive income $ (1,542) $ (1,314)
</TABLE>
NOTE D - BOTTLING TRANSACTIONS
In August 1998, we exchanged our Korean bottling operations with
Coca-Cola Amatil Limited (CCA) for additional ownership interest in
CCA.
In June 1998, we sold to Coca-Cola Beverages plc (CCB) our wholly
owned Italian bottling operations in northern and central Italy, for
proceeds valued at approximately $1 billion. The proceeds we received
consisted of cash, notes receivable and shares of stock of CCB. As a
result of this sale, we recognized an after-tax gain of approximately
$.03 per share (basic and diluted).
8
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE D - BOTTLING TRANSACTIONS (Continued)
In August 1997, we sold our 48 percent interest in Coca-Cola
Beverages, Ltd. of Canada and our 49 percent interest in The Coca-Cola
Bottling Company of New York, Inc. to Coca-Cola Enterprises (CCE) in
exchange for aggregate consideration valued at approximately $456
million in cash. This transaction resulted in an after-tax gain of
approximately $.04 per share (basic and diluted).
In February 1997, we sold our 49 percent interest in Coca-Cola &
Schweppes Beverages Ltd. to CCE. This transaction resulted in cash
proceeds for our Company of approximately $1 billion and an after-tax
gain of approximately $.08 per share (basic and diluted).
NOTE E - ISSUANCES OF STOCK BY EQUITY INVESTEES
At the time an equity investee sells its stock to third parties at a
price in excess of its book value, our Company's equity in the
underlying net assets of that investee increases. We generally record
an increase to our investment account and a corresponding gain in
these transactions.
In the third quarter of 1998, Coca-Cola Erfrischungsgetraenke AG
(CCEAG), a bottler in Germany, issued new shares valued at
approximately $275 million to effect a merger with Nordwest Getraenke
GmbH & Co. KG, another German bottler. Approximately 7.5 million
shares were issued, resulting in a one-time noncash pretax gain for
our Company of approximately $27 million. We provided deferred taxes
of approximately $10 million on this gain. This issuance reduced our
ownership in CCEAG from approximately 45 percent to approximately 40
percent.
In June 1997, our Company and San Miguel Corporation (San Miguel)
sold their respective interests in Coca-Cola Bottlers Philippines,
Inc. to Coca-Cola Amatil Limited (Coca-Cola Amatil) in exchange for
approximately 293 million shares of Coca-Cola Amatil stock. In
connection with this transaction, Coca-Cola Amatil issued
approximately 210 million shares to San Miguel valued at $2,429
million. The issuance to San Miguel resulted in a one-time noncash
pretax gain for our Company of approximately $343 million. We
provided deferred taxes of approximately $141.5 million on this gain.
This transaction resulted in our Company's 36 percent interest in
Coca-Cola Amatil being diluted to 33 percent.
9
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE E - ISSUANCES OF STOCK BY EQUITY INVESTEES (Continued)
In May 1997, our Company and The Cisneros Group of Companies
(Cisneros Group) sold their respective interests in Coca-Cola y Hit de
Venezuela to Panamerican Beverages, Inc. (Panamco) in exchange for
approximately 30.6 million shares of Panamco stock. In connection
with this transaction, Panamco issued approximately 13.6 million
shares to the Cisneros Group valued at approximately $402 million.
The issuance to the Cisneros Group resulted in a one-time noncash
pretax gain for our Company of approximately $20 million. We provided
deferred taxes of approximately $7.2 million on this gain. At the
completion of this transaction, our ownership in Panamco was
approximately 23 percent.
If gains have been previously recognized on issuances of an equity
investee's stock and shares of the equity investee are subsequently
repurchased by the equity investee, gain recognition would not occur
on issuances subsequent to the date of a repurchase until such time as
shares have been issued in an amount equivalent to the number of
repurchased shares. This type of transaction is reflected as an
equity transaction and the net effect is reflected in the accompanying
condensed consolidated balance sheet.
In June 1998, CCE completed its acquisition of CCBG Corporation and
Texas Bottling Group, Inc. (collectively known as Coke Southwest).
The transaction was valued at approximately $1.1 billion, with
approximately 55 percent of the transaction funded with the issuance
of approximately 17.7 million shares of CCE common stock, and the
remaining portion funded through debt and assumed debt. The CCE
common stock issued in exchange for Coke Southwest was valued in an
amount greater than the book value per share of our investment in CCE.
As a result of this transaction, our equity in the underlying net
assets of CCE increased, and we recorded a $257 million increase to
our Company's investment basis in CCE. Due to CCE's share repurchase
program, the increase in our investment in CCE was recorded as an
equity transaction and no gain was recognized. We recorded a deferred
tax liability of approximately $101 million on this increase to our
investment in CCE. At the completion of this transaction, our
ownership in CCE was approximately 42 percent.
10
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE F - ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Essentially, the new
statement requires all derivatives to be recorded on the balance sheet
at fair value and establishes new accounting practices for hedge
instruments. The statement is effective for years beginning after
June 15, 1999. We are currently assessing the impact this statement
will have on our consolidated financial statements.
In March 1998, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use.
Also, in June 1998, the AICPA issued SOP 98-5 "Reporting on the Costs
of Start-Up Activities." SOP 98-5 requires costs of start-up
activities and organizational costs, as defined, to be expensed as
incurred. These statements are effective for fiscal years beginning
after December 15, 1998. We do not expect either of these SOP's to
have a material impact on our Company's consolidated financial
statements.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
BEVERAGE VOLUME
In the third quarter of 1998, our worldwide unit case volume
(excluding volume of The Minute Maid Company) increased 3 percent and
gallon shipments of concentrates and syrups grew 5 percent, on top of
third quarter 1997 growth rates of 11 percent and 14 percent,
respectively. Our unit case volume and gallon shipments have each
increased 9 percent for the first nine months of 1998.
The third quarter 1998 increase in volume is primarily a result of
our Company's investment in marketing activities and continued
development of infrastructure (including bottlers, capital and
information systems), offset by the impacts of difficult economic
conditions in many parts of the world. As previously disclosed, year-
to-date volume results are impacted in the first quarter of 1998 by
additional shipping days as compared to the first quarter of 1997.
This increase in shipping days will be offset by an equal reduction in
shipping days in the fourth quarter of 1998 as compared to the fourth
quarter of 1997.
In the third quarter of 1998, volume increased 3 percent for The
Minute Maid Company compared to an 8 percent decline in the third
quarter of 1997. The 1998 increase is a result of brand building
initiatives and increases in share of sales for Minute Maid Premium
ready-to-drink orange juice products. For the first nine months of
1998, volume for The Minute Maid Company increased 1 percent compared
to the first nine months of 1997.
NET OPERATING REVENUES AND GROSS MARGIN
Although worldwide gallon shipments increased 5 percent in the third
quarter of 1998, net operating revenues declined 4 percent due to the
impact of a stronger U.S. dollar and the sales in 1998 and 1997 of
previously consolidated bottling operations. Net operating revenues
increased 1 percent year to date versus the prior year.
Our gross profit margin increased to 69.5 percent in the third
quarter of 1998 from 66.5 percent in the third quarter of 1997. The
increase in gross margin for the third quarter of 1998 was due
primarily to the sales in 1998 and 1997 of previously consolidated
bottling operations, which shifted proportionately more revenue to our
higher margin concentrate business.
12
<PAGE>
RESULTS OF OPERATIONS (Continued)
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling, administrative and general expenses were $2,064 million in
the third quarter of 1998, compared to $2,052 million in the third
quarter of 1997. The increase was due primarily to higher marketing
investments in support of our Company's volume growth, offset by the
sales in 1998 and 1997 of previously consolidated bottling operations.
For the first nine months of the year, selling, administrative and
general expenses were $6,062 million, compared to $5,776 million for
the same period in 1997.
OPERATING INCOME AND OPERATING MARGIN
Operating income for the third quarter of 1998 totaled $1,237
million, a decrease of $6 million from the third quarter of 1997.
Third quarter 1998 operating income reflects the difficult economic
conditions in many markets throughout the world, the impact of the
stronger U.S. dollar and the sales of previously consolidated bottling
operations in 1998 and 1997. Operating margin for the third quarter
of 1998 was 26.1 percent, compared to 25.1 percent for the comparable
period in 1997. Operating income and operating margin for the nine
months ended September 30, 1998 were $4,030 million and 28.1 percent,
respectively, compared to $3,828 million and 27.0 percent for the nine
months ended September 30, 1997.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased in the third quarter and the nine month
period ended September 30, 1998 relative to the comparable periods in
1997, due primarily to cash held in locations outside the United
States earning higher interest income in the current year. Interest
expense increased in the third quarter and for the nine months ended
September 30, 1998, relative to the comparable periods in 1997, due to
receipt of proceeds from the 1997 sales of our interests in Coca-Cola
& Schweppes Beverages Ltd., Coca-Cola Beverages, Ltd. of Canada and
The Coca-Cola Bottling Company of New York, Inc. These proceeds
decreased the average 1997 commercial paper debt balances and related
interest expense.
EQUITY INCOME
Our equity income for the third quarter of 1998 totaled $51 million,
compared to $46 million in the third quarter of 1997. For the first
nine months of 1998, equity income totaled $103 million, compared to
$152 million for the same period in 1997. In 1998, equity income has
been negatively impacted by difficult economic conditions in many
worldwide markets as well as continued structural changes in the
global bottling system.
13
<PAGE>
RESULTS OF OPERATIONS (Continued)
GAINS ON ISSUANCES OF STOCK BY EQUITY INVESTEES
In the third quarter of 1998, Coca-Cola Erfrischungsgetraenke AG
(CCEAG), a bottler in Germany, issued new shares valued at
approximately $275 million to effect a merger with Nordwest Getraenke
GmbH & Co. KG, another German bottler. Approximately 7.5 million
shares were issued, resulting in a one-time noncash pretax gain for
our Company of approximately $27 million. We provided deferred taxes
of approximately $10 million on this gain. This issuance reduced our
ownership in CCEAG from approximately 45 percent to approximately 40
percent.
In June 1997, our Company and San Miguel Corporation (San Miguel)
sold their respective interests in Coca-Cola Bottlers Philippines,
Inc. to Coca-Cola Amatil Limited (Coca-Cola Amatil) in exchange for
approximately 293 million shares of Coca-Cola Amatil stock. In
connection with this transaction, Coca-Cola Amatil issued to San
Miguel approximately 210 million shares valued at $2,429 million. The
issuance to San Miguel resulted in a one-time noncash pretax gain for
our Company of approximately $343 million. We provided deferred taxes
of approximately $141.5 million on this gain. This transaction
resulted in our Company's 36 percent interest in Coca-Cola Amatil
being diluted to 33 percent.
In May 1997, our Company and The Cisneros Group of Companies
(Cisneros Group) sold their respective interests in Coca-Cola y Hit de
Venezuela to Panamerican Beverages, Inc. (Panamco) in exchange for
approximately 30.6 million shares of Panamco stock. In connection
with this transaction, Panamco issued approximately 13.6 million
shares to the Cisneros Group valued at approximately $402 million.
The issuance to the Cisneros Group resulted in a one-time noncash
pretax gain for our Company of approximately $20 million. We provided
deferred taxes of approximately $7.2 million on this gain. At the
completion of this transaction, our ownership in Panamco was
approximately 23 percent.
OTHER INCOME (LOSS) - NET
Other income (loss) - net was $(12) million for the third quarter of
1998 compared to $224 million for the third quarter of 1997. The
decrease reflects gains recognized in the third quarter of 1997 on the
sales of our bottling interests in Coca-Cola Beverages, Ltd. of
Canada, The Coca-Cola Bottling Company of New York, Inc., Coca-Cola
Rhein-Ruhr and Coca-Cola FEMSA de Buenos Aires, S.A. For the first
nine months of 1998, other income (loss) - net was $211 million,
compared to $566 million in the comparable period of the prior year.
The decrease in the first nine months of 1998 as compared to the first
nine months of 1997 reflects the impacts of the first quarter 1997
gain from the sale of our interest in Coca-Cola & Schweppes Beverages
Ltd. and the third quarter 1997 gains from the sales of certain
bottling interests, partially offset by the second quarter 1998 gain
on the sale of our northern and central Italy bottling operations to
Coca-Cola Beverages plc.
14
<PAGE>
RESULTS OF OPERATIONS (Continued)
INCOME TAXES
Our effective tax rate was 31.0 percent for the third quarter of
1998 compared to 32.8 percent for the third quarter of 1997. The
effective tax rate was 32.2 percent for the first nine months of 1998
compared to 32.0 percent for the first nine months of 1997. Our
effective tax rate reflects tax benefits derived from significant
operations outside the United States which are taxed at rates lower
than the U.S. statutory rate of 35 percent, partially offset by the
tax impact of certain gains recognized from previously discussed
bottling transactions. These transactions are generally taxed at
rates higher than our Company's effective rate on operations.
15
<PAGE>
FINANCIAL CONDITION
NET CASH FLOW PROVIDED BY OPERATIONS AFTER REINVESTMENT
In the first nine months of 1998, net cash flow after reinvestment
totaled $1,480 million, a decrease of $2,227 million over the
comparable period in 1997.
Cash provided by operating activities in the first nine months of
1998 amounted to $2,604 million, an $840 million decrease compared to
the first nine months of 1997. The decrease was primarily due to the
timing of payments of accounts payable and accrued expenses and
accrued income taxes (net change in operating assets and liabilities).
Net cash used in investing activities totaled $1,124 million for the
first nine months of 1998 compared to $263 million in cash provided by
investing activities for the first nine months of 1997. As previously
discussed, we sold our interests in Coca-Cola & Schweppes Beverages
Ltd., Coca-Cola Beverages, Ltd. of Canada and The Coca-Cola Bottling
Company of New York, Inc. in 1997 resulting in higher proceeds from
disposals of investments and other assets in 1997.
FINANCING
Our financing activities primarily consist of net borrowings,
dividend payments and share repurchases. Net cash used in financing
activities totaled $1,437 million and $2,935 million for the first
nine months of 1998 and 1997, respectively. For the first nine months
of 1998, our Company had net borrowings of $915 million, versus net
repayments of $1,392 million for the comparable period of 1997. This
difference in net borrowings was due primarily to proceeds received
from the 1997 sale of Company bottling interests, as previously
discussed, and to higher commercial paper borrowings in 1998.
Cash used for share repurchases was $1,459 million for the first
nine months of 1998, compared to $957 million for the first nine
months of 1997.
Cash used for dividend payments was $1,089 million for the first
nine months of 1998, compared to $695 million for the first nine
months of 1997. The increase was due primarily to the timing of
dividend payments, as 1998 included three quarterly dividend payments
while 1997 included two quarterly dividend payments.
16
<PAGE>
FINANCIAL CONDITION (Continued)
FINANCIAL POSITION
The change in our investment in Coca-Cola Enterprises (CCE) in the
first nine months of 1998 is primarily a result of CCE's issuance of
stock in an acquisition as discussed in Note E of the accompanying
condensed consolidated financial statements. Our investment in CCA
decreased due to the spin-off of Coca-Cola Beverages plc (CCB) to its
share owners, partially offset by the receipt of additional ownership
interest in CCA in exchange for our wholly owned Korean bottling
operations. CCB is a separate entity created to manage the operations
of CCA's former eastern European business.
EURO CONVERSION
The existing currencies of certain member countries of the European
Union are being phased out and will be replaced with the European
Union's common currency (Euro). The transition period for this
process begins January 1, 1999, when a permanent fixed conversion
rate between the existing currencies of the countries and the Euro
will be established. Our Company has been preparing for the
introduction of the Euro for several years. We believe we are ready
for the establishment of permanent fixed conversion rates on
January 1, 1999. The mandatory elimination of the other currencies is
scheduled to phase in over a period ending January 1, 2002 (with the
existing currency being completely removed from circulation on July 1,
2002). The timing of our phasing out all uses of the existing
currencies will comply with the legal requirements and also be
scheduled to facilitate optimal coordination with the plans of our
vendors, distributors and customers. Our work in preparing for the
introduction of the Euro and the phasing out of the other currencies
includes converting information technology systems, recalculating
currency risk, recalibrating derivatives and other financial
instruments, evaluating and taking action if needed regarding
continuity of contracts and modifying our processes for preparing tax,
accounting, payroll and customer records. Based on our work to date,
we believe the introduction of the Euro and the phasing out of the
other currencies will not have a material impact on our Company's
consolidated financial position, results of operations or cash flows.
EXCHANGE
Our international operations are subject to certain opportunities
and risks, including currency fluctuations and governmental actions.
We closely monitor our operations in each country and adopt
appropriate strategies responsive to each environment. On a weighted
average basis, the U.S. dollar was approximately 9 percent stronger
during the third quarter of 1998 versus a weighted average basket of
foreign currencies for the comparable period of the prior year. This
percentage does not include the effects of our hedging activities and,
therefore, does not reflect the actual impact of fluctuations in
exchange rates on operating results. Our foreign currency management
program mitigates over time a portion of the impact of exchange on net
income and earnings per share.
17
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FINANCIAL CONDITION (Continued)
YEAR 2000
Certain computer programs written with two digits rather than four
to define the applicable year may experience problems handling dates
near the end of and beyond the year 1999 (Y2K failure dates). This
may cause computer applications to fail or to create erroneous results
unless corrective measures are taken. The Year 2000 (Y2K) problem can
arise at any point in the Company's supply, manufacturing, processing,
distribution, and financial chains.
Aided by third party service providers, we are implementing a plan
to address the anticipated impacts of the Y2K problem on our
information technology (IT) systems and on non-IT systems involving
embedded chip technologies (non-IT systems). We are also surveying
selected third parties to determine the status of their Y2K compliance
programs. In addition, we are developing contingency plans specifying
what the Company will do if it or important third parties experience
disruptions as a result of the Y2K problem.
With respect to IT systems, our Y2K plan includes programs relating
to (i) computer applications, including those for mainframes, client
server systems, minicomputers and personal computers (the Applications
Program) and (ii) IT infrastructure, including hardware, software,
network technology, and voice and data communications (the
Infrastructure Program). In the case of non-IT systems, our Y2K plan
includes programs relating to (i) equipment and processes required to
produce and distribute beverage concentrates and syrups, finished
beverages, juices and juice-drink products (the Manufacturing Program)
and (ii) equipment and systems in buildings that our Company occupies
or leases to third parties (the Facilities Program).
Each of the foregoing IT and non-IT programs is being conducted in
phases, described as follows:
INVENTORY PHASE -- Identify hardware, software, processes or devices
that use or process date information.
ASSESSMENT PHASE -- Identify Y2K date processing deficiencies and
related implications.
PLANNING PHASE -- Determine for each deficiency an appropriate
solution and budget. Schedule resources and develop testing plans.
IMPLEMENTATION PHASE -- Implement designed solutions. Conduct
systems testing.
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FINANCIAL CONDITION (Continued)
YEAR 2000 (Continued)
The plan also includes a control element intended to ensure that
changes to IT and non-IT systems do not introduce Y2K issues.
Our Y2K plan is subject to modification and is revised periodically
as additional information is developed. The Company currently
believes that its Y2K plan will be completed in all material respects
prior to the anticipated Y2K failure dates. As of the respective
dates indicated below, status reports regarding the Applications,
Infrastructure, Manufacturing and Facilities Programs are as follows:
APPLICATIONS PROGRAM (AS OF SEPTEMBER 26, 1998): The inventory,
assessment and planning phases have been completed for all 40
applications considered to be mission-critical, and implementation
phase progress is as follows: 19 are complete; 15 more are expected to
be complete by December 1998; and the remaining six are expected to be
complete by June 1999. Of approximately 2,100 other applications we
have identified, approximately 1,900 have been assessed and 970 of
these have been determined to have Y2K issues. Remaining assessment
phase work is expected to be complete by January 1999. We have
completed the planning and implementation phases for approximately
31 percent of the 970 applications and we expect to complete the
remainder by year-end 1999.
INFRASTRUCTURE PROGRAM (AS OF OCTOBER 24, 1998): The inventory
phase is estimated to be approximately 82 percent complete and is
expected to be fully completed by March 1999. Approximately 2,000
"components" have been identified to date. (We define a component
as a particular type (of which there may be numerous individual
iterations) of software package, computer or telecommunications
hardware, or lab or research equipment, including any supporting
software and utilities.) The assessment, planning and implementation
phases are estimated to be approximately 68 percent, 44 percent and
24 percent complete, respectively, and are expected to be fully
completed by April, July and October 1999, respectively.
MANUFACTURING PROGRAM (AS OF OCTOBER 28, 1998): We have identified
74 separate manufacturing operations in which our Company's ownership
interest is 50 percent or greater. Of these, 69 operations have now
completed the inventory phase and all are expected to have done so by
January 1999. The assessment phase is complete in 39 operations and
is expected to be fully completed by February 1999. Planning phase
work is in progress in 34 operations, has been completed in 12
operations, and is expected to be fully completed by April 1999.
Implementation phase work is under way in 34 operations, has been
completed in one operation and is expected to be fully completed by
July 1999.
19
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FINANCIAL CONDITION (Continued)
YEAR 2000 (Continued)
FACILITIES PROGRAM (AS OF SEPTEMBER 26, 1998): Preliminary
inventories are estimated to be approximately 92 percent complete and
are expected to be fully completed by February 1999, subject to post-
completion verification. The assessment, planning and implementation
phases are estimated to be approximately 81 percent, 61 percent and 34
percent complete, respectively, and are expected to be fully completed
by March, April and July 1999, respectively. Owners of properties
leased by our Company are being contacted in order to assess the Y2K
readiness of their facilities.
THIRD PARTY Y2K READINESS. The Company has material relationships
with third parties whose failure to be Y2K compliant could have
materially adverse impacts on our Company's business, operations or
financial condition in the future. Third parties that we consider to
be in this category for Y2K purposes (Key Business Partners) include
critically important customers, suppliers, vendors and public entities
such as government regulatory agencies, utilities, financial entities
and others.
CUSTOMERS: We derive most of our net operating revenues from sales
of concentrates, syrups and finished products to authorized third
parties, including bottling and canning operations (Bottlers) that
produce, package and distribute beverages bearing the Company's
trademarks. Our Company has made Y2K awareness information available
to all Bottlers and has asked each Bottler to advise the Company of
the Bottler's plans for reaching Y2K readiness with respect to non-IT
systems. As of October 30, 1998, unconsolidated Bottlers representing
approximately 91 percent of our 1997 worldwide unit case volume from
unconsolidated Bottlers have made their plans available to us,
including all ten of our anchor bottlers. We have also contacted the
Bottlers to inquire about their state of Y2K readiness with respect to
IT systems, as well as the actions being taken by Bottlers with
respect to third parties. Further action may be taken by the Company
as it deems appropriate in particular cases.
In addition, we have met and exchanged information with a limited
number of key non-Bottler customers regarding Y2K readiness issues.
We are now formalizing these contacts into a program designed to help
us assess the Y2K readiness of key non-Bottler customers.
20
<PAGE>
FINANCIAL CONDITION (Continued)
YEAR 2000 (Continued)
SUPPLIERS AND VENDORS: The Company classifies as "critical" those
suppliers of products or services consumed on an ongoing basis that,
if interrupted, would materially disrupt the Company's ability to
deliver products or conduct operations. We are conducting on site
reviews of suppliers identified as critical on a worldwide basis, for
purposes of assessing their Y2K plans and their progress toward
implementation. We expect all of these reviews to be completed by
April 1999. In addition, each Company field location is working to
assess the likelihood of supply issues with suppliers classified as
critical on a regional basis.
Suppliers of less critical importance to our business, and vendors
from whom we buy goods expected to be in service beyond 1999, have
been sent a questionnaire from us asking about the status of their Y2K
plans. Although response rates to date have been low, responses will
be evaluated, certain selected goods are being tested, and follow-up
action will be taken by the Company as it deems appropriate.
PUBLIC ENTITIES: In August 1998, we began the planning and
implementation of a Y2K program involving interaction with and
assessment of public entities such as government regulatory agencies,
utilities, financial entities and others.
CONTINGENCY PLANS. The Company is preparing contingency plans
relating specifically to identified Y2K risks, and cost estimates
relating to these plans are being developed. We began training
designated employees in Y2K contingency planning matters during the
third quarter of 1998. We anticipate completion of the Y2K
contingency plans during the first half of 1999. Contingency plans
may include stockpiling raw and packaging materials, increasing
inventory levels, securing alternate sources of supply and other
appropriate measures. Once developed, Y2K contingency plans and
related cost estimates will be continually refined as additional
information becomes available.
Y2K RISKS. While the Company currently believes that it will be
able to modify or replace its affected systems in time to minimize any
significant detrimental effects on its operations, failure to do so, or
the failure of Key Business Partners or other third parties to modify
or replace their affected systems, could have materially adverse
impacts on the Company's business, operations or financial condition
in the future. There can be no guarantee that such impacts will not
occur. In particular, because of the interdependent nature of business
systems, the Company could be materially adversely affected if private
businesses, utilities and governmental entities with which it does
business or that provide essential products or services are not Y2K
ready. The Company currently believes that the
21
<PAGE>
FINANCIAL CONDITION (Continued)
YEAR 2000 (Continued)
greatest risk of disruption in its businesses exists in certain
international markets. Reasonably likely consequences of failure
by the Company or third parties to resolve the Y2K problem include,
among other things, temporary slowdowns or cessations of manufacturing
operations at one or more Company or Bottler facilities, delays in the
delivery or distribution of products, delays in the receipt of supplies,
invoice and collection errors, and inventory and supply obsolescence.
However, the Company believes that its Y2K readiness program, including
related contingency planning, should significantly reduce the
possibility of significant interruptions of normal operations.
COSTS. As of October 30, 1998, the Company's total incremental
costs (historical plus estimated future costs) of addressing Y2K
issues are estimated to be in the range of $130 million to $160
million, of which approximately $60 million has been incurred. These
costs are being funded through operating cash flow. These amounts do
not include: (i) any costs associated with the implementation of
contingency plans, which are in the process of being developed, or
(ii) costs associated with replacements of computerized systems or
equipment in cases where replacement was not accelerated due to Y2K
issues.
Implementation of our Company's Y2K plan is an ongoing process.
Consequently, the above described estimates of costs and completion
dates for the various components of the plan are subject to change.
For further information regarding Y2K matters, see the disclosures
under Forward-Looking Statements on page 24.
22
<PAGE>
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
We have no material changes to the disclosure made in our report on
Form 10-K for the year ended December 31, 1997 on this matter.
23
<PAGE>
Part II. Other Information
Item 5. Other Information
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the Act)
provides a safe harbor for forward-looking statements made by or on
behalf of our Company. Our Company and its representatives may from
time to time make written or verbal forward-looking statements,
including statements contained in this report and other filings with
the Securities and Exchange Commission and in our reports to share
owners. All statements which address operating performance, events or
developments that we expect or anticipate will occur in the future,
including statements relating to volume growth, share of sales and
earnings per share growth, statements expressing general optimism
about future operating results, and non-historical Year 2000
information, are forward-looking statements within the meaning of the
Act. The forward-looking statements are, and will be, based on
management's then current views and assumptions regarding future
events and operating performance.
FACTORS THAT MAY IMPACT FORWARD-LOOKING STATEMENTS OR FINANCIAL
PERFORMANCE
The following are some of the factors that could affect our
financial performance or could cause actual results to differ
materially from estimates contained in or underlying our Company's
forward-looking statements.
-- Our ability to generate sufficient cash flows to support
capital expansion plans, share repurchase programs and general
operating activities.
-- Competitive product and pricing pressures and our ability to
gain or maintain share of sales in the global market as a
result of actions by competitors. While we believe our
opportunities for sustained, profitable growth are
considerable, unanticipated actions of competitors could
impact our earnings, share of sales and volume growth.
-- Changes in laws and regulations, including changes in
accounting standards, taxation requirements (including tax
rate changes, new tax laws and revised tax law
interpretations) and environmental laws in domestic or foreign
jurisdictions.
-- Fluctuations in the cost and availability of raw materials and
the ability to maintain favorable supplier arrangements and
relationships.
-- Our ability to achieve earnings forecasts, which are generated
based on projected volumes and sales of many product types,
some of which are more profitable than others. There can be
no assurance that we will achieve the projected level or mix
of product sales.
24
<PAGE>
FORWARD-LOOKING STATEMENTS (Continued)
-- Interest rate fluctuations and other capital market conditions,
including foreign currency rate fluctuations. Most of our
exposures to capital markets, including interest and foreign
currency, are managed on a consolidated basis, which allows us
to net certain exposures and, thus, take natural offsets. We
use derivative financial instruments to reduce our net
exposure to financial risks. There can be no assurance,
however, that our financial risk management program will be
successful in reducing foreign currency exposures.
-- Economic and political conditions in international markets,
including civil unrest, governmental changes and restrictions
on the ability to transfer capital across borders.
-- Our ability to penetrate developing and emerging markets, which
also depends on economic and political conditions and how well
we are able to acquire or form strategic business alliances
with local bottlers and make necessary infrastructure
enhancements to production facilities, distribution networks,
sales equipment and technology. Moreover, the supply of
products in developing markets must match the customers'
demand for those products, and due to product price and
cultural differences, there can be no assurance of product
acceptance in any particular market.
-- The effectiveness of our advertising, marketing and promotional
programs.
-- The uncertainties of litigation, as well as other risks and
uncertainties detailed from time to time in our Company's
Securities and Exchange Commission filings.
-- Adverse weather conditions, which could reduce demand for
Company products.
25
<PAGE>
FORWARD-LOOKING STATEMENTS (Continued)
-- Our ability and the ability of our Key Business Partners and
other third parties to replace, modify or upgrade computer
systems in ways that adequately address the Y2K problem. Given
the numerous and significant uncertainties involved, there can
be no assurance that Y2K-related estimates and anticipated
results will be achieved, and actual results could differ
materially. Specific factors that might cause such material
differences include, but are not limited to, the ability to
identify and correct all relevant computer codes and embedded
chips, unanticipated difficulties or delays in the
implementation of Y2K project plans and the ability of third
parties to adequately address their own Y2K issues.
-- Our ability to timely resolve issues relating to introduction
of the European Union's common currency (Euro).
The foregoing list of important factors is not exclusive.
26
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 - The Coca-Cola Company 1987 Stock Option Plan,
as amended through October 15, 1998
10.2 - The Coca-Cola Company 1991 Stock Option Plan,
as amended through October 15, 1998
12 - Computation of Ratios of Earnings to Fixed Charges
27 - Financial Data Schedule for the nine months ended
September 30, 1998, submitted to the Securities and
Exchange Commission in electronic format
(b) Reports on Form 8-K:
No report on Form 8-K has been filed during the quarter for
which this report is filed.
27
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
THE COCA-COLA COMPANY
(REGISTRANT)
Date: November 12, 1998 By: /s/ Gary P. Fayard
------------------------------
Gary P. Fayard
Vice President and Controller
(On behalf of the Registrant and
as Chief Accounting Officer)
28
<PAGE>
EXHIBIT INDEX
Exhibit Number and Description
10.1 - The Coca-Cola Company 1987 Stock Option Plan,
as amended through October 15, 1998
10.2 - The Coca-Cola Company 1991 Stock Option Plan,
as amended through October 15, 1998
12 - Computation of Ratios of Earnings to Fixed Charges
27 - Financial Data Schedule for the nine months ended
September 30, 1998, submitted to the Securities and
Exchange Commission in electronic format
Exhibit 10.1
THE COCA-COLA COMPANY
1987 STOCK OPTION PLAN
as amended through October 15, 1998
SECTION 1. PURPOSE
The purpose of the 1987 Stock Option Plan of The Coca-Cola
Company (the "Plan") is to advance the interest of The Coca-Cola
Company (the "Company") and its Affiliates (as defined in Section
4 hereof) by encouraging and enabling the acquisition of a
financial interest in the Company by officers and other key
employees. In addition, the Plan is intended to aid the Company
and its Affiliates in attracting and retaining key employees, to
stimulate the efforts of such employees and to strengthen their
desire to remain in the employ of the Company and its Affiliates.
The Company may grant stock options which constitute "incentive
stock options" ("ISOs") within the meaning of Section 422A of the
Internal Revenue Code of 1954, as amended (the "Code"), or stock
options which do not constitute ISOs ("NSOs") (ISOs and NSOs
being hereinafter collectively referred to as "Options"). The
Company may also grant cash amounts ("Cash Awards") in connection
with certain NSOs and may grant certain officers of the Company
stock appreciation rights ("Rights") for use in connection with
Options or with other stock options granted by the Company.
SECTION 2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board")
or in accordance with Section 7, Article III of the By-Laws of
the Company (as amended through October 17, 1996) from among its
members. Unless and until its members are not qualified to serve
on the Committee pursuant to the provisions of the Plan, the
Compensation Committee of the Board shall function as the
Committee. Eligibility requirements for members of the Committee
shall comply with Rule 16b-3 promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or any successor rule or regulation. No person, other than
members of the Committee, shall have any discretion concerning
decisions regarding the Plan. Members of the Committee shall be
members of the Board who are not eligible to participate under
the Plan and who have not been eligible to participate in the
Plan for at least one (1) year prior to the time at which they
become members of the Committee. The Committee shall determine
the key employees of the Company and its Affiliates (including
officers, whether or not they are directors) to whom, and the
time or times at which, Options, Cash Awards and Rights will be
granted, the number of shares to be subject to each Option, the
duration of each Option or Right, the time or times within which
the Option or Right may be exercised, the cancellation of the
Option, Cash Award or Right (with the consent of the holder
thereof) and the other conditions of the grant of the Option,
Cash Award or Right. The provisions and conditions of the grants
of Options, Cash Awards and Rights need not be the same with
respect to each optionee or with respect to each Option, each
Cash Award or each Right.
The Committee may, subject to the provisions of the Plan,
establish such rules and regulations as it deems necessary or
advisable for the proper administration of the Plan, and may make
determinations and may take such other action in connection with
or in relation to the Plan as it deems necessary or advisable.
Each determination or other action made or taken pursuant to the
Plan, including interpretation of the Plan and the specific
conditions and provisions of the Options, Cash Awards and Rights
granted hereunder by the Committee shall be final and conclusive
for all purposes and upon all persons including, but without
limitation, the Company, its Affiliates, the Committee, the
Board, officers and the affected employees of the Company and/or
its Affiliates and their respective successors in interest.
<PAGE>
SECTION 3. STOCK
The stock to be issued, transferred and/or sold under the Plan
shall be shares of Common Stock, $.25 par value, of the Company
(the "Stock"). The Stock shall be made available from authorized
and unissued Common Stock of the Company or from the Company's
treasury shares. Pursuant to Section 13 of the Plan, no
additional Options or Rights may be granted under the Plan after
April 15, 1992. The number of shares subject to existing
Options or Rights granted prior to such date are subject to
adjustment in accordance with Section 12 hereof. Stock subject
to any unexercised portion of an Option or Right which expires or
is cancelled, surrendered or terminated for any reason may again
be subject to Options and/or Rights granted under the Plan. Upon
surrender of an Option or a stock option granted under any other
plan heretofore or hereafter adopted by the Company and the
exercise of a Right, the number of shares of Stock subject to the
surrendered Option or stock option shall be charged against the
maximum number of shares of Stock issuable or transferable under
the Plan or the stock option plan pursuant to which the
surrendered Option or stock option was granted, and such number
of shares of Stock shall not be issuable or transferable under
such Plan or plan in the future. The surrender of any stock
option issued other than pursuant to a stock option plan pursuant
to the exercise of a Right shall not result in a charge against
the maximum number of shares issuable or transferable under the
Plan or any other stock option plan.
SECTION 4. ELIGIBILITY
Options, Cash Awards and Rights may be granted to employees of
the Company and its Affiliates. The term "Affiliates" shall mean
any corporation or other business organization in which the
Company owns, directly or indirectly, 25 percent or more of the
voting stock or capital at the time of the granting of such
Option or Right; provided, however, that no ISO may be granted to
any employee of an Affiliate which is not a corporation or to any
employee of an Affiliate which is not at least 50 percent owned,
directly or indirectly, by the Company. No employee shall be
granted the right to acquire pursuant to Options granted under
the Plan more than 5 percent of the aggregate number of shares of
Stock issuable under the Plan.
SECTION 5. AWARDS OF OPTIONS
Except as otherwise specifically provided herein, Options granted
pursuant to the Plan shall be subject to the following terms and
conditions:
(a) OPTION PRICE. The option price shall be 100 percent of the
fair market value of the Stock on the date of grant. The fair
market value of a share of Stock shall be the average of the high
and low market prices at which a share of Stock shall have been
sold on the date of grant, or on the next preceding trading day
if such date was not a trading date, as reported on the New York
Stock Exchange Composite Transactions listing.
(b) PAYMENT. The option price shall be paid in full at the time
of exercise, except as provided in the next sentence. For
exercises of NSOs executed by Merrill Lynch, Pierce Fenner &
Smith using the cashless method, the exercise price shall be paid
in full no later than the close of business on the third business
day following the exercise. "Business day" means a day on which
the New York Stock Exchange is open for securities trading.
No shares shall be issued or transferred until full payment has
been received therefor. Payment may be in cash or, with the
prior approval of and upon conditions established by the
Committee, by delivery of shares of Stock owned by the optionee.
Cash payment for the shares purchased under an NSO may be offset
by the amount of any Cash Award approved by the Committee. If
payment is made by the delivery of shares of Stock, the value of
the shares delivered shall be computed on the basis of the
reported market price at which a share of Stock shall have most
recently traded prior to the time the exercise order was
processed. Such price will be determined by reference to the New
York Stock Exchange Composite Transactions listing.
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(c) DURATION OF OPTIONS. The duration of Options shall be
determined by the Committee, but in no event shall the duration
of an Option exceed ten (10) years from the date of its grant.
(d) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, not inconsistent with the provisions of the Plan, as
the Committee shall determine appropriate from time to time;
provided, however, that, except in the event of a "Change in
Control", death or disability of the optionee or "Retirement", as
defined in Section 10, no Option shall be exercisable in whole or
in part for a period of twelve (12) months from the date on which
the Option is granted, and subject to the provisions of Section
10 hereof, thereafter the ratio of the number of shares for which
any such Option is exercisable through any given date may not
exceed the ratio of the number of months (a fraction thereof
counting as a full month) between the date on which the Option is
granted and such given date to a period of thirty-six (36) months
(or such lesser period as determined by the Committee in its
discretion). The grant of an Option and/or Right to any employee
shall not affect in any way the right of the Company and any
Affiliate to terminate the employment of the holder thereof.
(e) ISOs. The Committee, with respect to each grant of an Option
to an optionee, shall determine whether such Option shall be an
ISO, and, upon determining that an Option shall be an ISO, shall
designate it as such in the written instrument evidencing such
Option. If the written instrument evidencing an Option does not
contain a designation that it is an ISO, it shall not be an ISO.
The aggregate fair market value (determined in each instance on
the date on which an ISO is granted) of the Stock with respect to
which ISOs are first exercisable by any optionee in any calendar
year shall not exceed $100,000 for such optionee. If any
subsidiary or Affiliate of the Company shall adopt a stock option
plan under which options constituting incentive stock options (as
defined in Section 422A(b) of the Code) may be granted, the fair
market value of the Stock on which any such incentive stock
options are granted and the times at which such incentive stock
options will first become exercisable shall be taken into account
in determining the maximum amount of ISOs which may be granted to
the optionee in any calendar year.
SECTION 6. AWARDS OF RIGHTS
The Committee may, at any time and in its discretion, grant to
any officer of the Company who is awarded or who holds an
outstanding Option or any other outstanding stock option granted
by the Company the right to surrender such Option (to the extent
any Option or such other stock option is otherwise exercisable)
and to receive from the Company an amount equal to the excess, if
any, of the fair market value of the Stock with respect to which
such Option is surrendered on the date of such surrender over the
option price of the Option or other stock option surrendered. No
ISO may be surrendered in connection with the exercise of a Right
unless the fair market value of the Stock subject to the ISO is
greater than the option price for such Stock. Payment by the
Company of the amount receivable upon any exercise of a Right may
be made by the delivery of Stock or cash or any combination of
Stock and cash, as determined in the sole discretion of the
Committee from time to time. No fractional shares shall be used.
The Committee may provide for the elimination of fractional
shares of Stock without adjustment or for the payment of the
value of such fractional shares in cash. Shares of Stock of the
Company delivered to the optionee upon the exercise of a Right
and the surrender of the Option or stock option shall be valued
at the fair market value of a share of Stock on the date the
right is exercised and the Option or stock option is surrendered.
The Committee may limit the period or periods during which the
Rights may be exercised and may provide such other terms and
conditions (which need not be the same with respect to each
optionee) under which a Right may be granted and/or exercised. A
Right may be exercised only as long as the related Option or
stock option is exercisable; provided, however, that no Right may
be exercised and cash paid in partial or complete satisfaction
thereof during the first six (6) months exercised following the
date of grant of the Right and related Option. In no event may a
Right be exercised more than ten (10) years after the date of the
grant of the Right and the related Option or stock option. The
fair market value of a share of Stock shall be the average of the
high and low market prices at which a share of Stock shall have
been sold on the date the Option or the stock option is
surrendered or on the next preceding trading day, if such date is
not a trading day, as reported on the New York Stock Exchange
Composite Transactions listing.
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SECTION 7. CASH AWARDS
The Committee may, at any time and in its discretion, grant to
any employee who is granted an NSO the right to receive, at such
times and in such amounts as determined by the Committee in its
discretion, a cash amount ("Cash Award") which is intended to
reimburse the employee for all or a portion of the Federal, state
and local income taxes imposed upon such employee as a
consequence of the exercise of an NSO and the receipt of a Cash
Award.
SECTION 8. REPLACEMENT AND EXTENSION OF THE TERMS OF OPTIONS,
CASH AWARDS AND RELATED RIGHTS
The Committee from time to time may permit an optionee under the
Plan or any other stock option plan heretofore or hereafter
adopted by the Company to surrender for cancellation any
unexercised outstanding stock option and related Right and
receive from the Company in exchange an Option for such number of
shares of Stock as may be designated by the Committee. Such
optionees also may be granted related Rights or Cash Awards as
provided in Sections 6 and 7. In addition, the Committee may
extend the duration of any NSO and/or Right for a period not to
exceed one (1) year, subject to the provisions of paragraph 5(c),
without changing the option price and on such other terms and
conditions as the Committee may deem advisable.
SECTION 9. NONTRANSFERABILITY OF OPTION AND RIGHT
No Option or Right granted pursuant to the Plan shall be
transferable otherwise than by will or by the laws of descent and
distribution. During the lifetime of an optionee, the Option and
Right shall be exercisable only by the optionee personally or by
the optionee's legal representative.
SECTION 10. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH,
RETIREMENT OR A CHANGE IN CONTROL
(a) If an optionee's employment with the Company and/or its
Affiliates shall be terminated for any reason, except death,
disability or Retirement, as hereinafter defined, to the extent
the Option was exercisable by the optionee at the date of such
termination of employment, the optionee shall be entitled to
exercise the Option for the period of six (6) months from the
date of such termination of employment unless the Option, by its
terms, expires prior thereto, except as provided in paragraph (b)
of this Section 10.
(b) If an optionee shall die or become disabled while an
employee of the Company or any Affiliate or within six (6) months
from the date of termination of employment with the Company or
any Affiliate but prior to the expiration of the Option, the
executor or administrator of the optionee's estate or a
transferee of the Option pursuant to Section 9 or the disabled
employee shall have the right to exercise the Option, and the
right to exercise the Option shall terminate upon the earliest of
(i) the expiration of twelve (12) months from the date of such
termination of employment, (ii) the expiration of twelve (12)
months from the date of the optionee's death or disability, or
(iii) as otherwise provided by the terms of the Option. As used
in the Plan, the term "disabled" shall have the meaning set forth
in the Company's Long Term Disability Income Plan.
(c) If an optionee's employment with the Company and/or its
Affiliates shall be terminated by reason of death, disability or
Retirement, all Options held by the optionee shall become
exercisable. Death or disability of the optionee occurring after
termination of employment with the Company and/or its Affiliates
shall not cause any Options to become exercisable. The optionee
shall be entitled to exercise exercisable Option or Options for
the period of six (6) months from the date of Retirement or, in
the case of such death or disability, in accordance with the
terms of Section 10(b) hereof, unless any such Option, by its
terms, expires prior thereto. "Retirement", as used herein,
shall mean an employee's termination of employment on a date
which is on or after the earliest date on which such employee
would be eligible for an immediately payable benefit pursuant to
(i) for those employees eligible for participation in the
Company's Supplemental Retirement Plan, the terms of that Plan
and (ii) for all other employees, the terms of the Employees
Retirement Plan (the "ERP") assuming such employee were eligible
to participate in the ERP.
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<PAGE>
(d) All Options held by an optionee shall become exercisable
upon the occurrence of a Change in Control. A "Change in
Control" shall mean a change in control of a nature that would be
required to be reported in response to item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Exchange Act as in effect
on November 15, 1988, provided that such a change in control
shall be deemed to have occurred at such time as (i) any "person"
(as that term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) directly or indirectly, of
securities representing 20% or more of the combined voting power
for election of directors of the then outstanding securities of
the Company or any successor of the Company; (ii) during any
period of two consecutive years or less, individuals who at the
beginning of such period constituted the Board of Directors of
the Company cease, for any reason, to constitute at least a
majority of the Board of Directors, unless the election or
nomination for election of each new director was approved by a
vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period; (iii) the
shareholders of the Company approve any merger or consolidation
as a result of which the Stock shall be changed, converted or
exchanged (other than a merger with a wholly-owned subsidiary of
the Company) or any liquidation of the Company or any sale or
other disposition of 50% or more of the assets or earning power
of the Company; or (iv) the shareholders of the Company approve
any merger or consolidation to which the Company is a party as a
result of which the persons who were shareholders of the Company
immediately prior to the effective date of the merger or
consolidation shall have beneficial ownership of less than 50% of
the combined voting power for election of directors of the
surviving corporation following the effective date of such merger
or consolidation; provided, however, that no Change in Control
shall be deemed to have occurred if, prior to such time as a
Change in Control would otherwise be deemed to have occurred, the
Board of Directors determines otherwise.
(e) Whether military or other government eleemosynary service or
other leave of absence will constitute termination of employment
shall be determined in each case by the Committee in its sole
discretion.
SECTION 11. RIGHTS AS A SHAREHOLDER
An optionee or a transferee of an optionee pursuant to Section 9
shall have no right as a stockholder with respect to any Stock
covered by an Option or receivable upon the exercise of an Option
or Right until the optionee or transferee shall have become the
holder of record of such Stock, and no adjustments shall be made
for dividends in cash or other property or other distributions or
rights in respect to such Stock for which the record date is
prior to the date on which the optionee or transferee shall have
in fact become the holder of record of the share of Stock
acquired pursuant to the Option or Right.
SECTION 12. ADJUSTMENT IN THE NUMBER OF SHARES AND IN OPTION
PRICE
In the event there is any change in the shares of Stock through
the declaration of stock dividends, or stock splits or through
recapitalization or merger or consolidation or combination of
shares or otherwise, the Committee or the Board shall make such
adjustment, if any, as it may deem appropriate in the number of
shares of Stock available for Options and Rights as well as the
number of shares of Stock subject to any outstanding Option or
Right and the option price thereof. Any such adjustment may
provide for the elimination of any fractional shares which might
otherwise become subject to any Option or Right without payment
therefor.
SECTION 13. AMENDMENTS, MODIFICATIONS AND TERMINATION OF THE
PLAN
The Board or the Committee may terminate the Plan, in whole or in
part, may suspend the Plan, in whole or in part, from time to
time and may amend the Plan from time to time, including the
adoption of amendments deemed necessary or desirable to qualify
the Options, Cash Awards and/or Rights under the laws of various
countries (including tax laws) and under rules and regulations
promulgated by the Securities and Exchange Commission with
respect to employees who are subject to the provisions of Section
16 of the Exchange Act, or to correct any defect or supply an
omission or reconcile any inconsistency in the Plan or in any
Option or Right granted thereunder, without the approval of the
stockholders of the Company; provided, however, that no action
shall be taken without the approval of the stockholders of the
Company to increase the number of shares of Stock on which
Options and Rights may
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<PAGE>
be granted, or change the manner of determining the option price
or change the manner of determining the amount payable upon
exercise of a Right, or increase the maximum duration of an
Option, or change the class of employees eligible to participate,
or withdraw administration from the Committee, or permit any
person while a member of the Committee to be eligible to receive
or hold an Option or Right granted under the Plan.
No amendment or termination or modification of the Plan shall in
any manner affect any Option, Cash Award or Right theretofore
granted without the consent of the optionee, except that the
Committee may amend or modify the Plan in a manner that does
affect Options, Cash Awards or Rights theretofore granted upon a
finding by the Committee that such amendment or modification is
in the best interest of holders of outstanding Options, Cash
Awards or Rights affected thereby. The Plan shall terminate five
(5) years after the date of approval of the Plan by stockholders
of the Company unless earlier terminated by the Board or by the
Committee.
SECTION 14. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant
thereto shall be governed by the laws of the State of Georgia and
construed in accordance therewith.
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Exhibit 10.2
THE COCA-COLA COMPANY
1991 STOCK OPTION PLAN
as amended through October 15, 1998
SECTION 1. PURPOSE
The purpose of the 1991 Stock Option Plan of The Coca-Cola
Company (the "Plan") is to advance the interest of The Coca-Cola
Company (the "Company") and its Affiliates (as defined in Section
4 hereof) by encouraging and enabling the acquisition of a
financial interest in the Company by officers and other key
employees of the Company or its Affiliates. In addition, the Plan
is intended to aid the Company and its Affiliates in attracting
and retaining key employees, to stimulate the efforts of such
employees and to strengthen their desire to remain in the employ
of the Company and its Affiliates.
The Company may grant stock options which constitute
"incentive stock options" ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"),
or stock options which do not constitute ISOs ("NSOs") (ISOs and
NSOs being hereinafter collectively referred to as "Options").
The Company may grant certain officers of the Company stock
appreciation rights ("Rights") for use in connection with Options
or with other stock options granted by the Company.
SECTION 2. ADMINISTRATION
The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company
(the "Board") or in accordance with Section 7, Article III of the
By-Laws of the Company (as amended through October 17, 1996) from
among its members. Unless and until its members are not qualified
to serve on the Committee pursuant to the provisions of the Plan,
the Compensation Committee of the Board shall function as the
Committee. Eligibility requirements for members of the Committee
shall comply with Rule 16b-3 promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or
any successor rule or regulation. No person, other than members
of the Committee, shall have any discretion concerning decisions
regarding the Plan. The Committee shall determine the key
employees of the Company and its Affiliates (including officers,
whether or not they are directors) to whom, and the time or times
at which, Options and Rights will be granted, the number of shares
to be subject to each Option, the duration of each Option or
Right, the time or times within which the Option or Right may be
exercised, the cancellation of the Option or Right (with the
consent of the holder thereof) and the other conditions of the
grant of the Option or Right at grant or while outstanding
pursuant to the terms of the Plan. The provisions and conditions
of the Options and Rights need not be the same with respect to
each optionee or with respect to each Option or each Right.
The Committee may, subject to the provisions of the Plan,
establish such rules and regulations as it deems necessary or
advisable for the proper administration of the Plan, and may make
determinations and may take such other action in connection with
or in relation to the Plan as it deems necessary or advisable.
Each determination or other action made or taken pursuant to the
Plan, including interpretation of the Plan and the specific
conditions and provisions of the Options and Rights granted
hereunder by the Committee shall be final and conclusive for all
purposes and upon all persons including, but without limitation,
the Company, its Affiliates, the Committee, the Board, officers
and the affected employees of the Company and/or its Affiliates
and their respective successors in interest.
SECTION 3. STOCK
The stock to be issued, transferred and/or sold under the
Plan shall be shares of Common Stock, $.25 par value, of the
Company (the "Stock"). The Stock shall be made available from
authorized and unissued Common Stock of the Company or from the
Company's treasury shares. The total number of shares of Stock
that may be issued or transferred under the Plan pursuant to
Options and Rights granted thereunder may not exceed 59,551,338
shares (subject to adjustment as described below). This number
represents the number of shares originally authorized in the Plan,
adjusted for a 2-for-1 stock split which occurred on May 1, 1992
and subsequently for a 2-for-1 stock split which occurred on May
1, 1996 in
<PAGE>
accordance with Section 10, less the number of shares already
issued or subject to outstanding Options or Rights issued
pursuant to the Plan as of October 1, 1996. Such number of shares
shall be subject to adjustment in accordance with Section 10
hereof and this Section 3. Stock subject to any unexercised
portion of an Option or Right which expires or is cancelled,
surrendered or terminated for any reason may again be subject to
Options and/or Rights granted under the Plan. Upon surrender of
an Option or stock option granted under any other plan heretofore
or hereafter adopted by the Company and the exercise of a Right,
the number of shares of Stock subject to the surrendered Option or
stock option shall be charged against the maximum number of shares
of Stock issuable or transferable under the Plan or the stock
option plan pursuant to which the surrendered Option or stock
option was granted, and such number of shares of Stock shall not
be issuable or transferable under such Plan or plan in the future.
The surrender of any stock option issued other than pursuant to a
stock option plan pursuant to the exercise of a Right shall not
result in a charge against the maximum number of shares issuable
or transferable under the Plan or any other stock option plan.
SECTION 4. ELIGIBILITY
Options and Rights may be granted to employees of the Company
and its Affiliates. The term "Affiliates" shall mean any
corporation or other business organization in which the Company
owns, directly or indirectly, 25% or more of the voting stock or
capital at the time of the granting of such Option or Right;
provided, however, that no ISO may be granted to any employee of
an Affiliate which is not a corporation or to any employee of an
Affiliate which is not at least 50% owned, directly or indirectly,
by the Company. Any ISOs held by an optionee of an Affiliate
which ceases to be 50% owned will become NSOs three (3) months
after the date that the Company's ownership of the Affiliate falls
below 50%. If ownership falls below 25% an optionee will be
considered terminated for purposes of Section 8 on the date that
the Company's ownership of the Affiliate falls below 25%. No
employee shall be granted the right to acquire pursuant to Options
granted under the Plan more than 15% of the aggregate number of
shares of Stock originally authorized under the Plan, as adjusted
pursuant to Section 10 hereof.
SECTION 5. AWARDS OF OPTIONS
Except as otherwise specifically provided herein, Options
granted pursuant to the Plan shall be subject to the following
terms and conditions:
(a) OPTION PRICE. The option price shall be 100% of the
fair market value of the Stock on the date of grant. The
fair market value of a share of Stock shall be the average of
the high and low market prices at which a share of Stock
shall have been sold on the date of grant, or on the next
preceding trading day if such date was not a trading date, as
reported on the New York Stock Exchange Composite
Transactions listing.
(b) PAYMENT. The option price shall be paid in full at
the time of exercise, except as provided in the next
sentence. For exercises of ISOs granted on or after October
15, 1998, and exercises of NSOs, if such exercises are
executed by Merrill Lynch, Pierce, Fenner & Smith using the
cashless method, the exercise price shall be paid in full no
later than the close of business on the third business day
following the exercise. "Business day" means a day on which
the New York Stock Exchange is open for securities trading.
No shares shall be issued or transferred until full payment
has been received therefor. Payment may be in cash or, with
the prior approval of and upon conditions established by the
Committee, by delivery of shares of Stock owned by the
optionee.
The optionee, if a U.S. taxpayer, may elect to satisfy
Federal, state and local income tax liabilities due by reason
of the exercise by the withholding or tendering of shares of
Stock.
If shares are delivered to pay the option price or if shares
are withheld for U.S. taxpayers to satisfy such tax
liabilities, the value of the shares delivered or withheld
shall be computed on the basis of the reported market price
at which a share of Stock most recently traded prior to the
time the exercise order was processed. Such price will be
determined by reference to the New York Stock Exchange
Composite Transactions listing.
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<PAGE>
(c) DURATION OF OPTIONS. The duration of Options shall be
determined by the Committee, but in no event shall the
duration of an Option exceed ten (10) years from the date of
its grant.
(d) OTHER TERMS AND CONDITIONS. Options may contain such
other provisions, not inconsistent with the provisions of the
Plan, as the Committee shall determine appropriate from time
to time; provided, however, that, except in the event of a
"Change in Control" or disability of the optionee, as both
are defined in Section 8, or death of the optionee no Option
shall be exercisable in whole or in part for a period of
twelve (12) months from the date on which the Option is
granted, and, subject to the provisions of Section 8 hereof,
thereafter the ratio of the number of shares for which any
such Option is exercisable through any given date may not
exceed the ratio of the number of months between the date on
which the Option is granted and such given date to a period
of thirty-six (36) months (or such lesser period as may be
then or later determined by the Committee in its discretion).
The grant of an Option and/or Right to any employee shall not
affect in any way the right of the Company and any Affiliate
to terminate the employment of the holder thereof.
(e) ISOs. The Committee, with respect to each grant of an
Option to an optionee, shall determine whether such Option
shall be an ISO, and, upon determining that an Option shall
be an ISO, shall designate it as such in the written
instrument evidencing such Option. If the written instrument
evidencing an Option does not contain a designation that it
is an ISO, it shall not be an ISO.
The aggregate fair market value (determined in each instance
on the date on which an ISO is granted) of the Stock with respect
to which ISOs are first exercisable by any optionee in any
calendar year shall not exceed $100,000 for such optionee. If any
subsidiary or Affiliate of the Company shall adopt a stock option
plan under which options constituting incentive stock options (as
defined in Section 422(b) of the Code) may be granted, the fair
market value of the Stock on which any such incentive stock
options are granted and the times at which such incentive stock
options will first become exercisable shall be taken into account
in determining the maximum amount of ISOs which may be granted to
the optionee in any calendar year.
SECTION 6. AWARDS OF RIGHTS
The Committee may, at any time and in its discretion, grant
to any officer of the Company who is awarded or who holds an
outstanding Option or any other outstanding stock option granted
by the Company the right to surrender such Option (to the extent
any Option or such other stock option is otherwise exercisable)
and to receive from the Company an amount equal to the excess, if
any, of the fair market value of the Stock with respect to which
such Option is surrendered on the date of such surrender over the
option price of the Option or other stock option surrendered. No
ISO may be surrendered in connection with the exercise of a Right
unless the fair market value of the Stock subject to the ISO is
greater than the option price for such Stock. Payment by the
Company of the amount receivable upon any exercise of a Right may
be made by the delivery of Stock or cash or any combination of
Stock and cash, as determined in the sole discretion of the
Committee from time to time. No fractional shares shall be used.
The Committee may provide for the elimination of fractional shares
of Stock without adjustment or for the payment of the value of
such fractional shares in cash. Shares of Stock of the Company
delivered to the optionee upon the exercise of a Right and the
surrender of the Option or stock option shall be valued at the
fair market value of a share of Stock on the date the right is
exercised and the Option or stock option is surrendered. The
Committee may limit the period or periods during which the Rights
may be exercised and may provide such other terms and conditions
(which need not be the same with respect to each optionee) under
which a Right may be granted and/or exercised. A Right may be
exercised only as long as the related Option or stock option is
exercisable; provided, however, that no Right may be exercised and
cash paid in partial or complete satisfaction thereof during the
first six (6) months following the date of grant of the Right and
related Option. In no event may a Right be exercised more than
ten (10) years after the date of the grant of the Right and the
related Option or stock option. The fair market value of a share
of Stock shall be the average of the high and low market prices at
which a share of Stock shall have been sold on the date the Option
or the stock option is surrendered or on the next preceding
trading day, if such date is not a trading day, as reported on the
New York Stock Exchange Composite Transactions listing.
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<PAGE>
SECTION 7. NONTRANSFERABILITY OF OPTION AND RIGHT
No Option or Right granted pursuant to the Plan shall be
transferable otherwise than by will or by the laws of descent and
distribution. During the lifetime of an optionee, the Option and
Right shall be exercisable only by the optionee personally or by
the optionee's legal representative.
SECTION 8. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH,
RETIREMENT OR A CHANGE IN CONTROL
(a) ACCELERATION. If an optionee's employment with the
Company and/or its Affiliates shall be terminated by reason of
death or disability or in the event of a Change in Control, all
Options held by the optionee shall become exercisable. If an
optionee's employment with the Company and/or its Affiliates shall
be terminated by reason of Retirement (as defined below), all
Options held by the optionee for at least twelve full calendar
months prior to Retirement shall become exercisable. Death or
disability of the optionee occurring after termination of
employment with the Company and/or its Affiliates shall not cause
any Options to become exercisable. As used in the Plan, the term
"disabled" shall have the meaning set forth in the Company's Long
Term Disability Income Plan. "Retirement", as used herein, shall
mean an employee's termination of employment on a date which is on
or after the earliest date on which such employee would be
eligible for an immediately payable benefit pursuant to (i) for
those employees eligible for participation in the Company's
Supplemental Retirement Plan, the terms of that Plan and (ii) for
all other employees, the terms of the Employee Retirement Plan
(the "ERP") assuming such employee were eligible to participate in
the ERP. "Retire" shall mean to enter Retirement.
A "Change in Control" shall mean a change in control of a
nature that would be required to be reported in response to item
(6e) of Schedule 14A of Regulation 14A promulgated under the 1934
Act as in effect on November 15, 1988, provided that such a change
in control shall be deemed to have occurred at such time as (i)
any "person" (as that term is used in Sections 13(d) and 14(d)(2)
of the 1934 Act), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the 1934 Act) directly or indirectly, of
securities representing 20% or more of the combined voting power
for election of directors of the then outstanding securities of
the Company or any successor of the Company; (ii) during any
period of two (2) consecutive years or less, individuals who at
the beginning of such period constituted the Board of Directors of
the Company cease, for any reason, to constitute at least a
majority of the Board of Directors, unless the election or
nomination for election of each new director was approved by a
vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period; (iii) the
shareholders of the Company approve any merger or consolidation as
a result of which the Stock shall be changed, converted or
exchanged (other than a merger with a wholly owned subsidiary of
the Company) or any liquidation of the Company or any sale or
other disposition of 50% or more of the assets or earning power of
the Company; or (iv) the shareholders of the Company approve any
merger or consolidation to which the Company is a party as a
result of which the persons who were shareholders of the Company
immediately prior to the effective date of the merger or
consolidation shall have beneficial ownership of less than 50% of
the combined voting power for election of directors of the
surviving corporation following the effective date of such merger
or consolidation; provided, however, that no Change in Control
shall be deemed to have occurred if, prior to such times as a
Change in Control would otherwise be deemed to have occurred, the
Board of Directors determines otherwise.
(b) EXERCISE PERIOD. If an optionee's employment with the
Company and/or its Affiliates shall be terminated for any reason,
except death, disability or Retirement to the extent the Option
was exercisable by the optionee at the date of such termination of
employment, the optionee shall be entitled to exercise the Option
for the period of six (6) months from the date of such termination
of employment unless the Option by its terms expires prior
thereto, except as otherwise provided herein.
If an optionee shall become disabled while an employee of the
Company or any Affiliate or within six (6) months after the date
of termination of employment with the Company or any Affiliate but
prior to the expiration of the Option, or if an optionee shall
Retire, the retired optionee, the transferee of the Option
pursuant to Section 7 or the disabled employee shall have the
right to exercise the Option, and the right to exercise the Option
shall terminate as provided by the terms of the Option. If an
optionee shall die while an employee of the Company or any
Affiliate or within six (6) months from the date of termination of
employment with the Company or any Affiliate but prior to the
expiration of the Option, the executor or administrator of the
optionee's estate or a transferee of the Option pursuant to
Section 7 shall have the
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<PAGE>
right to exercise the Option, and the right to exercise the Option
shall terminate upon the earliest of (i) the expiration of twelve
(12) months from the date of such termination of employment, (ii)
the expiration of twelve (12) months from the date of the
optionee's death, or (iii) as otherwise provided by the terms of
the Option. The occurrence of a Change in Control shall have no
effect on the duration of the exercise period.
Whether military or other government or eleemosynary service
or other leave of absence will constitute termination of
employment shall be determined in each case by the Committee in
its sole discretion.
Notwithstanding the foregoing termination provisions, the
Committee may, in its sole discretion, establish different terms
and conditions pertaining to the effect of an optionee's
termination on the expiration or exercisability of newly granted
options or (with the consent of the affected optionee) outstanding
options. However, no Option or Right can have a term of more than
ten years.
SECTION 9. NO RIGHTS AS A SHAREHOLDER
An optionee or a transferee of an optionee pursuant to
Section 7 shall have no right as a shareholder with respect to any
Stock covered by an Option or receivable upon the exercise of an
Option or Right until the optionee or transferee shall have become
the holder of record of such Stock, and no adjustments shall be
made for dividends in cash or other property or other
distributions or rights in respect to such Stock for which the
record date is prior to the date on which the optionee or
transferee shall have in fact become the holder of record of the
share of Stock acquired pursuant to the Option or Right.
SECTION 10. ADJUSTMENT IN THE NUMBER OF SHARES AND IN OPTION
PRICE
In the event there is any change in the shares of Stock
through the declaration of stock dividends, or stock splits or
through recapitalization or merger or consolidation or combination
of shares or spin-offs or otherwise, the Committee or the Board
shall make such adjustment, if any, as it may deem appropriate in
the number of shares of Stock available for Options and Rights as
well as the number of shares of Stock subject to any outstanding
Option or Right and the option price thereof. Any such adjustment
may provide for the elimination of any fractional shares which
might otherwise become subject to any Option or Right without
payment therefor.
SECTION 11. AMENDMENTS, MODIFICATIONS AND TERMINATION OF THE
PLAN
The Board or the Committee may terminate the Plan, in whole
or in part, may suspend the Plan, in whole or in part, from time
to time and may amend the Plan from time to time, including the
adoption of amendments deemed necessary or desirable to qualify
the Options and/or Rights under the laws of various countries
(including tax laws) and under rules and regulations promulgated
by the Securities and Exchange Commission with respect to
employees who are subject to the provisions of Section 16 of the
1934 Act, or to correct any defect or supply an omission or
reconcile any inconsistency in the Plan or in any Option or Right
granted thereunder, or for any other purpose or to any effect
permitted by applicable laws and regulations, without the approval
of the shareholders of the Company. However, in no event may
additional shares of Stock be allocated to the Plan or any
outstanding option be repriced or replaced without shareholder
approval. Without limiting the foregoing, the Board of Directors
or the Committee may make amendments applicable or inapplicable
only to participants who are subject to Section 16 of the 1934
Act.
No amendment or termination or modification of the Plan shall
in any manner affect any Option or Right theretofore granted
without the consent of the optionee, except that the Committee may
amend or modify the Plan in a manner that does affect Options or
Rights theretofore granted upon a finding by the Committee that
such amendment or modification is in the best interest of holders
of outstanding Options or Rights affected thereby. Grants may be
made until April 19, 2001. The Plan shall terminate when there
are no longer Rights or Options outstanding under the Plan unless
earlier terminated by the Board or by the Committee.
-5-
<PAGE>
SECTION 12. GOVERNING LAW
The Plan and all determinations made and actions taken
pursuant thereto shall be governed by the laws of the State of
Georgia and construed in accordance therewith.
-6-
Exhibit 12
THE COCA-COLA COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(In millions except ratios)
<TABLE>
<CAPTION>
Nine months
Ended
September 30, Year Ended December 31,
------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income before income
taxes and changes in
accounting principles $ 4,333 $ 6,055 $ 4,596 $ 4,328 $ 3,728 $ 3,185
Fixed charges 240 300 324 318 236 213
Adjustments:
Capitalized
interest, net (11) (17) (7) (9) (5) (16)
Equity (income) loss,
net of dividends (52) (108) (89) (25) (4) (35)
--------- -------- -------- -------- -------- --------
Adjusted earnings $ 4,510 $ 6,230 $ 4,824 $ 4,612 $ 3,955 $ 3,347
========= ======== ======== ======== ======== ========
FIXED CHARGES:
Gross interest
incurred $ 220 $ 275 $ 293 $ 281 $ 204 $ 184
Interest portion of
rent expense 20 25 31 37 32 29
--------- -------- -------- -------- -------- ---------
Total fixed charges $ 240 $ 300 $ 324 $ 318 $ 236 $ 213
========= ======== ======== ======== ======== =========
Ratios of earnings
to fixed charges 18.8 20.8 14.9 14.5 16.8 15.7
========= ======== ======== ======== ======== =========
At September 30, 1998, our Company is contingently liable for
guarantees of indebtedness owed by third parties in the amount of
$389 million. Fixed charges for these contingent liabilities have
not been included in the computations of the above ratios as, in
the opinion of Management, it is not probable that we will be
required to satisfy the guarantees.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF THE COCA-COLA COMPANY FOR THE
QUARTER ENDED SEPTEMBER 30, 1998 AS SET FORTH IN ITS FORM 10-Q
FOR SUCH QUARTER, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,746
<SECURITIES> 83
<RECEIVABLES> 1,606
<ALLOWANCES> 12
<INVENTORY> 900
<CURRENT-ASSETS> 5,996
<PP&E> 5,623
<DEPRECIATION> 2,057
<TOTAL-ASSETS> 17,871
<CURRENT-LIABILITIES> 7,840
<BONDS> 688
0
0
<COMMON> 864
<OTHER-SE> 6,997
<TOTAL-LIABILITY-AND-EQUITY> 17,871
<SALES> 14,355
<TOTAL-REVENUES> 14,355
<CGS> 4,263
<TOTAL-COSTS> 4,263
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 209
<INCOME-PRETAX> 4,333
<INCOME-TAX> 1,397
<INCOME-CONTINUING> 2,936
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,936
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.18
</TABLE>
