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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 June 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 July 31, 1998
--------------------- -----------------------------
$.25 Par Value 2,465,494,076 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
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income
Three and six months ended June 30, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows
Six months ended June 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 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 18
Part II. Other Information
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 22
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<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>
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
CURRENT
Cash and cash equivalents $ 2,027 $ 1,737
Marketable securities 126 106
----------- -----------
2,153 1,843
Trade accounts receivable, less
allowances of $15 at June 30
and $23 at December 31 1,706 1,639
Inventories 919 959
Prepaid expenses and other assets 2,152 1,528
----------- -----------
TOTAL CURRENT ASSETS 6,930 5,969
----------- -----------
INVESTMENTS AND OTHER ASSETS
Equity method investments
Coca-Cola Enterprises Inc. 475 184
Coca-Cola Amatil Limited 713 1,204
Other, principally bottling companies 4,034 3,049
Cost method investments,
principally bottling companies 377 457
Marketable securities and other assets 1,656 1,607
----------- -----------
7,255 6,501
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 175 183
Buildings and improvements 1,445 1,535
Machinery and equipment 3,700 3,896
Containers 125 157
----------- -----------
5,445 5,771
Less allowances for depreciation 1,989 2,028
----------- -----------
3,456 3,743
----------- -----------
GOODWILL AND OTHER INTANGIBLE ASSETS 615 727
----------- -----------
$ 18,256 $ 16,940
=========== ===========
</TABLE>
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<PAGE>
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions except share data)
LIABILITIES AND SHARE-OWNERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
CURRENT
Accounts payable and accrued expenses $ 2,770 $ 3,249
Loans and notes payable 3,719 2,677
Current maturities of long-term debt 252 397
Accrued income taxes 1,264 1,056
----------- -----------
TOTAL CURRENT LIABILITIES 8,005 7,379
----------- -----------
LONG-TERM DEBT 686 801
----------- -----------
OTHER LIABILITIES 1,033 1,001
----------- -----------
DEFERRED INCOME TAXES 547 448
----------- -----------
SHARE-OWNERS' EQUITY
Common stock, $.25 par value
Authorized: 5,600,000,000 shares
Issued: 3,452,153,821 shares at June 30;
3,443,441,902 shares at December 31 863 861
Capital surplus 1,867 1,527
Reinvested earnings 19,177 17,869
Unearned compensation related to
outstanding restricted stock (47) (50)
Accumulated other comprehensive income (1,413) (1,314)
----------- -----------
20,447 18,893
Less treasury stock, at cost
(985,095,312 shares at June 30;
972,812,731 shares at December 31) 12,462 11,582
----------- -----------
7,985 7,311
----------- -----------
$ 18,256 $ 16,940
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE>
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In millions except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET OPERATING REVENUES $ 5,151 $ 5,075 $ 9,608 $ 9,213
Cost of goods sold 1,499 1,609 2,817 2,904
---------- ---------- ---------- ----------
GROSS PROFIT 3,652 3,466 6,791 6,309
Selling, administrative
and general expenses 2,141 2,023 3,998 3,724
---------- ---------- ---------- ----------
OPERATING INCOME 1,511 1,443 2,793 2,585
Interest income 63 51 115 100
Interest expense 75 62 137 130
Equity income 76 134 52 106
Gains on issuances of
stock by equity
investees - 363 - 363
Other income - net 228 6 223 342
---------- ---------- ---------- ----------
INCOME BEFORE INCOME
TAXES 1,803 1,935 3,046 3,366
Income taxes 612 621 998 1,065
---------- ---------- ---------- ----------
NET INCOME $ 1,191 $ 1,314 $ 2,048 $ 2,301
========== ========== ========== ==========
BASIC NET INCOME
PER SHARE $ .48 $ .53 $ .83 $ .93
========== ========== ========== ==========
DILUTED NET INCOME
PER SHARE $ .48 $ .52 $ .82 $ .91
========== ========== ========== ==========
DIVIDENDS PER SHARE $ .15 $ .14 $ .30 $ .28
========== ========== ========== ==========
AVERAGE SHARES
OUTSTANDING 2,469 2,480 2,470 2,480
========== ========== ========== ==========
Dilutive effect of
stock options 32 39 31 39
---------- ---------- ---------- ----------
AVERAGE SHARES
OUTSTANDING
ASSUMING DILUTION 2,501 2,519 2,501 2,519
========== ========== ========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE>
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1998 1997
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,048 $ 2,301
Depreciation and amortization 320 279
Deferred income taxes 1 (13)
Equity income, net of dividends (36) (71)
Foreign currency adjustments 60 38
Gains on issuances of stock by equity investees - (363)
Other items (141) (396)
Net change in operating assets and liabilities (605) 353
----------- -----------
Net cash provided by operating activities 1,647 2,128
----------- -----------
INVESTING ACTIVITIES
Acquisitions and investments,
principally bottling companies (465) (635)
Purchases of investments and other assets (279) (147)
Proceeds from disposals of investments
and other assets 404 1,263
Purchases of property, plant and equipment (410) (472)
Proceeds from disposals of property, plant
and equipment 20 44
Other investing activities (48) 42
----------- -----------
Net cash provided by (used in)
investing activities (778) 95
----------- -----------
Net cash provided by operations after
reinvestment 869 2,223
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FINANCING ACTIVITIES
Issuances of debt 1,088 106
Payments of debt (155) (494)
Issuances of stock 137 76
Purchases of stock for treasury (879) (405)
Dividends (729) (347)
----------- -----------
Net cash used in financing activities (538) (1,064)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (41) (40)
----------- -----------
CASH AND CASH EQUIVALENTS
Net increase during the period 290 1,119
Balance at beginning of period 1,737 1,433
----------- -----------
Balance at end of period $ 2,027 $ 2,552
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<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 six month period ended June 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.
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<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 June 30, Six Months Ended June 30,
-------------------------- ------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $1,191 $1,314 $2,048 $2,301
Net change in
unrealized gain
on available-for-sale
securities (37) (91) (21) (9)
Foreign currency
translation adjustment (90) (75) (78) (196)
-------- -------- -------- --------
Comprehensive income $1,064 $1,148 $1,949 $2,096
======== ======== ======== ========
</TABLE>
The components of accumulated other comprehensive income, net of related tax,
are as follows (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Unrealized gain on
available-for-sale securities $ 37 $ 58
Foreign currency translation adjustment (1,450) (1,372)
-------- --------
Accumulated other comprehensive income $ (1,413) $ (1,314)
======== ========
</TABLE>
NOTE D - BOTTLING TRANSACTIONS
In June 1998, we sold to Coca-Cola Beverages plc (CCB) our wholly
owned Italian bottling operations in northern and central Italy, in
exchange 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).
In February 1997, we sold our 49 percent interest in Coca-Cola &
Schweppes Beverages Ltd. to Coca-Cola Enterprises. 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).
- 8 -
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
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, Coca-Cola Enterprises (CCE) completed their
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 programs, 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. The transaction reduced our
ownership in CCE from approximately 44 percent to approximately 42
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.
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<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.
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.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
BEVERAGE VOLUME
In the second quarter of 1998, our worldwide unit case volume
(excluding volume of The Minute Maid Company) increased 10 percent and
gallon shipments of concentrates and syrups grew 9 percent, on top of
second quarter 1997 growth rates of 7 percent and 9 percent,
respectively. Our unit case volume and gallon shipments have each
increased 12 percent for the first six months of 1998.
The second quarter 1998 increase in volume is a result of our
Company's investment in marketing activities and continued development
of infrastructure (including bottlers, capital and information
systems). As previously announced, 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 second quarter of 1998, volume declined 3 percent for The
Minute Maid Company compared to a 6 percent decline in the second quarter
of 1997 due to increased raw material costs which led to higher pricing.
For the first six months of 1998, volume for The Minute Maid
Company increased 1 percent compared to the first six months of 1997.
NET OPERATING REVENUES AND GROSS MARGIN
Net operating revenues increased 1 percent in the second quarter of
1998 and 4 percent year to date versus comparable periods in the prior
year. The 1998 results were primarily driven by increased gallon
sales and selective price increases in certain markets, which were
significantly offset by the impact of a stronger U.S. dollar and the
1997 dispositions of previously consolidated bottling operations.
Our gross profit margin increased to 70.9 percent in the second
quarter of 1998 from 68.3 percent in the second quarter of 1997. The
increase in gross margin for the second quarter of 1998 was due
primarily to the sales in 1997 of previously consolidated bottling
operations, which shifted proportionately more revenue to our higher
margin concentrate business.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling, administrative and general expenses were $2,141 million
in the second quarter of 1998, compared to $2,023 million in the
second quarter of 1997. For the first six months of the year, selling,
administrative and general expenses were $3,998 million, compared to
$3,724 million for the same period in 1997. The increase is primarily
due to higher marketing investments in support of our Company's volume
growth. Also, in the second quarter of 1998 we recorded a nonrecurring
provision of $73 million, related primarily to the impairment of certain
assets in our global manufacturing system, compared to a $60 million
provision for manufacturing efficiencies in North America recorded in
the second quarter of 1997.
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<PAGE>
RESULTS OF OPERATIONS (Continued)
OPERATING INCOME AND OPERATING MARGIN
Operating income for the second quarter of 1998 increased to $1,511
million, an increase of 5 percent over the second quarter of 1997.
The increase was due primarily to increased gallon sales coupled with
an increase in gross profit margins, significantly offset by the
impact of the stronger U.S. dollar. Operating margin for the second
quarter of 1998 was 29.3 percent, compared to 28.4 percent for the
comparable period in 1997. Operating income and operating margin for
the six months ended June 30, 1998 were $2,793 million and 29.1
percent, respectively, compared to $2,585 million and 28.1 percent for
the six months ended June 30, 1997.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased in the second quarter and the six month
period ended June 30, 1998 relative to the comparable periods in 1997,
due primarily to higher average cash balances in the second quarter of
1998. Interest expense increased in the second quarter and for the
six months ended June 30, 1998, relative to the comparable periods in
1997, due to receipt of proceeds from the 1997 sale of Coca-Cola &
Schweppes Beverages Ltd. These proceeds decreased the average 1997
commercial paper debt balances and related interest expense.
EQUITY INCOME
Our share of income from equity method investments for the second
quarter of 1998 totaled $76 million, compared to $134 million in the
second quarter of 1997. This decrease is due primarily to the
continued significant amount of structural change in the global
bottling system and losses from new operations such as the Nordic and
India territories. For the first six months of 1998, equity income
totaled $52 million, compared to $106 million for the same period in
1997.
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<PAGE>
RESULTS OF OPERATIONS (Continued)
GAINS ON ISSUANCES OF STOCK BY EQUITY INVESTEES
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 - NET
Other income - net was $228 million for the second quarter of 1998
compared to $6 million for the second quarter of 1997. The increase
reflects the gain recognized in the second quarter 1998 on the sale of
our bottling operations in northern and central Italy to Coca-Cola
Beverages plc (CCB). For the first six months of 1998, other income -
net was $223 million, compared to $342 million in the comparable
period of the prior year. The decrease in the first six months of
1998 as compared to the first six months of 1997 reflects the impact
of the first quarter 1997 gain from the sale of our interest in
Coca-Cola & Schweppes Beverages Ltd., offset by the 1998 gain on the
sale of our northern and central Italy bottling operations.
- 13 -
<PAGE>
RESULTS OF OPERATIONS (Continued)
INCOME TAXES
Our effective tax rate was 33.9 percent for the second quarter of
1998 compared to 32.1 percent for the second quarter of 1997. The
effective tax rate was 32.8 percent for the first six months of 1998
compared to 31.6 percent for the first six 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.
- 14 -
<PAGE>
FINANCIAL CONDITION
NET CASH FLOW PROVIDED BY OPERATIONS AFTER REINVESTMENT
In the first six months of 1998, net cash flow after reinvestment
totaled $869 million, a decrease of $1,354 million over the comparable
period in 1997. Cash provided by operating activities in the first
six months of 1998 amounted to $1,647 million, a $481 million decrease
compared to the first six months of 1997. The decrease was due to the
timing of payments of year-end accruals and increases in various
prepaid expenses (net change in operating assets and liabilities).
Net cash used in investing activities totaled $778 million for the
first six months of 1998 compared to $95 million in cash provided by
investing activities for the first six months of 1997. As previously
discussed, the Company sold its interest in Coca-Cola & Schweppes
Beverages Ltd. in 1997 generating approximately $1 billion in cash
proceeds.
FINANCING
Our financing activities primarily consist of net borrowings,
dividend payments and share repurchases. Net cash used in financing
activities totaled $538 million and $1,064 million for the first six
months of 1998 and 1997, respectively. For the first six months of
1998, our Company had net borrowings of $933 million, versus net
repayments of $388 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.
Cash used for share repurchases was $879 million for the first six
months of 1998, compared to $405 million for the first six months of
1997.
FINANCIAL POSITION
The increases in our cash and cash equivalents and prepaid expenses
and other assets and decreases in our property, plant and equipment and
goodwill during the six months ended June 30, 1998 were primarily due to
the disposition of our previously consolidated bottling and canning
operations in Italy, as previously discussed.
The change in our investment in Coca-Cola Enterprises (CCE) in the
first six 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
financial statements. Our investment in Coca-Cola Amatil Limited (CCA)
decreased due to the spin-off of Coca-Cola Beverages plc (CCB) to its
share owners. CCB was a separate entity created to manage the operations
of CCA's eastern European business. Other equity method investments
increased primarily as a result of our equity participation in CCB
resulting from the CCA spin-off and the sale to CCB of our bottling
operations in northern and central Italy as discussed in Note D of the
accompanying condensed financial statements.
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<PAGE>
FINANCIAL CONDITION (Continued)
YEAR 2000
In earlier years, certain computer programs were written using two
digits rather than four to define the applicable year. These programs
were written without considering the impact of the upcoming change in
the century and may experience problems handling dates beyond the year
1999. This could cause computer applications to fail or to create
erroneous results unless corrective measures are taken. Incomplete or
untimely resolution of the Year 2000 issue by the Company, by
critically important suppliers or customers of the Company or by
governmental entities could have a materially adverse impact on our
Company's business, operations or financial condition in the future.
Our Company began work on Year 2000 related issues in 1995. We are
currently in the process of addressing the anticipated impacts of the
Year 2000 problem, including impacts on information technology (IT)
systems plus non-IT systems involving embedded chip technology.
The Company is implementing a plan to inventory critical systems and
develop solutions to those that are found to have date-related
deficiencies. Our Company has conducted an inventory of its
headquarters IT systems and currently is correcting those systems that
it found to have date-related deficiencies. Inventories of IT systems
outside of Company headquarters have been conducted and the Company is
in the process of validating those inventories and associated
correction plans. In the case of non-IT systems, our Company is
conducting an inventory of its facilities around the world and is
beginning the correction of date-deficient systems. Overall, project
plans call for the completion of the solution implementation phase and
testing of those solutions prior to any anticipated impact on our
systems. Our Company is also surveying selected third parties,
including critically important suppliers and customers as well as
governmental entities, to determine the status of their Year 2000
compliance programs.
Based on our work to date, the Company's total incremental costs
(historical plus estimated future costs) of addressing Year 2000
issues are currently estimated to be in the range of $130 million to
$160 million, of which approximately $50 million has been incurred.
For further discussion regarding the Year 2000 see our disclosure
under Forward-Looking Statements on page 21.
- 16 -
<PAGE>
FINANCIAL CONDITION (Continued)
EURO CONVERSION
On January 1, 1999, certain member countries of the European Union
are scheduled to establish fixed conversion rates between their
existing currencies and the European Union's common currency (Euro).
The transition period for the introduction of the Euro will be between
January 1, 1999 and January 1, 2002. Our Company has been preparing
for the introduction of the Euro for the past several years. We are
currently evaluating methods to address the many issues involved with
the introduction of the Euro, including the conversion of information
technology systems, recalculating currency risk, recalibrating
derivatives and other financial instruments, strategies concerning
continuity of contracts, and impacts on the processes for preparing
taxation and accounting records.
Based on our work to date we believe the Euro conversion will not
have a material impact on our Company's consolidated financial
statements.
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 10 percent stronger
during the second 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 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 -
<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.
- 18 -
<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 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.
- 19 -
<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.
- 20 -
<PAGE>
FORWARD-LOOKING STATEMENTS (Continued)
-- Our ability and our customers' and suppliers' ability to
replace, modify or upgrade computer programs in ways that
adequately address the Year 2000 issue. The Company's project
plans, which continue to evolve, including estimated costs and
dates for completion of Year 2000 remediation, are based in
important part on numerous assumptions about future events.
Certain of these assumptions, involving key matters such as
the availability of certain resources, third party remediation
plans and other factors, involve inherent uncertainties or are
not within the Company's control. Given the numerous and
significant uncertainties involved, there can be no assurance
that these estimates will be achieved, and actual results could
differ materially. Specific factors that might cause 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 project plans and the ability of third
parties to remediate their respective systems.
-- 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.
- 21 -
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10 - 1991 Stock Option Plan of the Registrant,
as amended through July 15, 1998
12 - Computation of Ratios of Earnings to Fixed Charges
27 - Financial Data Schedule for the six months ended
June 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.
- 22 -
<PAGE>
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: August 14, 1998 By: /s/ Gary P. Fayard
-----------------------------------
Gary P. Fayard
Vice President and Controller
(On behalf of the Registrant
and as Chief Accounting Officer)
- 23 -
<PAGE>
Exhibit Index
Exhibit Number and Description
10 - 1991 Stock Option Plan of the Registrant,
as amended through July 15, 1998
12 - Computation of Ratios of Earnings to Fixed Charges
27 - Financial Data Schedule for the six months ended
June 30, 1998, submitted to the Securities and
Exchange Commission in electronic format
Exhibit 10
THE COCA-COLA COMPANY
1991 STOCK OPTION PLAN
as amended through July 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
<PAGE>
occurred on May 1, 1992 and subsequently for a 2-for-1 stock split
which occurred on May 1, 1996 in 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. 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 payment or
satisfaction of such tax liabilities is made by the delivery
of shares of Stock, the value of the shares delivered (or
withheld in the case of tax withholding for U.S. taxpayers)
shall be computed on the basis of the average of the high and
low market prices at which a share of Stock shall have been
sold on the date the optionee elects to deliver shares of
Stock upon exercise of an Option, or tenders shares of Stock
or has shares of Stock withheld in the case of tax
withholding, or on the next preceding trading day if such
date was not a trading day, as reported on the New York Stock
Exchange Composite Transactions listing.
(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.
-2-
<PAGE>
(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.
-3-
<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 or pursuant to a qualified domestic relations order
as defined by the Code. 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
-4-
<PAGE>
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 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
-5-
<PAGE>
when there are no longer Rights or Options outstanding under the
Plan unless earlier terminated by the Board or by the Committee.
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>
Six Months
Ended Year Ended December 31,
June 30, ---------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income before income
taxes and changes in
accounting principles $ 3,046 $ 6,055 $ 4,596 $ 4,328 $ 3,728 $ 3,185
Fixed charges 157 300 324 318 236 213
Adjustments:
Capitalized
interest, net (7) (17) (7) (9) (5) (16)
Equity (income) loss,
net of dividends (36) (108) (89) (25) (4) (35)
------- ------- ------- ------- ------- -------
Adjusted earnings $ 3,160 $ 6,230 $ 4,824 $ 4,612 $ 3,955 $ 3,347
======= ======= ======= ======= ======= =======
FIXED CHARGES:
Gross interest
incurred $ 144 $ 275 $ 293 $ 281 $ 204 $ 184
Interest portion of
rent expense 13 25 31 37 32 29
------- ------- ------- ------- ------- -------
Total fixed charges $ 157 $ 300 $ 324 $ 318 $ 236 $ 213
======= ======= ======= ======= ======= =======
Ratios of earnings
to fixed charges 20.1 20.8 14.9 14.5 16.8 15.7
======= ======= ======= ======= ======= =======
<FN>
At June 30, 1998, our Company is contingently liable for guarantees
of indebtedness owed by third parties in the amount of $573 million.
Fixed charges for these contingent liabilities have not been included
in the computations of the above ratios as the amounts are immaterial
and, 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 JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,027
<SECURITIES> 126
<RECEIVABLES> 1,721
<ALLOWANCES> 15
<INVENTORY> 919
<CURRENT-ASSETS> 6,930
<PP&E> 5,445
<DEPRECIATION> 1,989
<TOTAL-ASSETS> 18,256
<CURRENT-LIABILITIES> 8,005
<BONDS> 686
0
0
<COMMON> 863
<OTHER-SE> 7,122
<TOTAL-LIABILITY-AND-EQUITY> 18,256
<SALES> 9,608
<TOTAL-REVENUES> 9,608
<CGS> 2,817
<TOTAL-COSTS> 2,817
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137
<INCOME-PRETAX> 3,046
<INCOME-TAX> 998
<INCOME-CONTINUING> 2,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,048
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.82
</TABLE>
