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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-09300
COCA-COLA ENTERPRISES INC.
(Exact name of registrant as specified in its charter)
Delaware 58-0503352
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Coca-Cola Plaza, N.W., Atlanta, Georgia 30313
(Address of principal executive offices) (Zip Code)
404-676-2100
(Registrant's telephone number, including area code)
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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 issuer's
classes of common stock.
129,721,512 Shares of $1 Par Value Common Stock as of August 4, 1995
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<PAGE>
COCA-COLA ENTERPRISES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1995
INDEX
Page
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Part I - Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the Quarters ended June 30, 1995
and July 1, 1994.................................. 1
Condensed Consolidated Statements of Operations
for the Six Months ended June 30, 1995
and July 1, 1994.................................. 2
Condensed Consolidated Balance Sheets as of
June 30, 1995 and December 31, 1994............... 3
Condensed Consolidated Statements of Cash Flows
for the Six Months ended June 30,1995
and July 1, 1994.................................. 5
Notes to Condensed Consolidated
Financial Statements.............................. 6
Part I - Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................................... 10
Part II - Item 1. Legal Proceedings........................ 15
Part II - Item 6. Exhibits and Reports on Form 8-K......... 15
Signatures................................................. 16
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions except per share data)
Quarter ended
------------------
June 30, July 1,
1995 1994
-------- -------
Net Operating Revenues......................... $ 1,827 $ 1,610
Cost of sales.................................. 1,153 987
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Gross Profit................................... 674 623
Selling, general and administrative expenses... 507 473
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Operating Income............................... 167 150
Interest expense, net.......................... 82 77
Other nonoperating deductions, net............. 3 -
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Income Before Income Taxes..................... 82 73
Income tax expense............................. 36 35
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Net Income..................................... 46 38
Preferred stock dividend requirements.......... - -
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Net Income Applicable to Common
Share Owners................................. $ 46 $ 38
======= =======
Average Common Shares Outstanding.............. 130 130
======= =======
Net Income Per Common Share.................... $ 0.35 $ 0.29
======= =======
Dividends Per Common Share..................... $0.0125 $0.0125
======= =======
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions except per share data)
Six Months ended
------------------
June 30, July 1,
1995 1994
-------- --------
Net Operating Revenues......................... $ 3,289 $ 2,929
Cost of sales.................................. 2,054 1,786
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Gross Profit................................... 1,235 1,143
Selling, general and administrative expenses... 992 924
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Operating Income............................... 243 219
Interest expense, net.......................... 162 157
Other nonoperating deductions, net............. 3 2
Gain from sale of interest in bottling
operation................................... 9 -
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Income Before Income Taxes..................... 87 60
Income tax expense............................. 38 28
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Net Income..................................... 49 32
Preferred stock dividend requirements.......... 1 1
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Net Income Applicable to Common
Share Owners................................ $ 48 $ 31
======= =======
Average Common Shares Outstanding.............. 129 130
======= =======
Net Income Per Common Share.................... $ 0.37 $ 0.24
======= =======
Dividends Per Common Share..................... $ 0.025 $ 0.025
======= =======
See Notes to Condensed Consolidated Financial Statements.
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
June 30, December 31,
ASSETS 1995 1994
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(Unaudited)
CURRENT
Cash and cash equivalents................... $ 42 $ 22
Trade accounts receivable, less allowances
of $36 and $34, respectively.............. 588 467
Inventories:
Finished goods............................ 194 170
Raw materials............................. 61 41
Other..................................... 28 25
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283 236
Prepaid expenses and other assets........... 216 85
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Total Current Assets........................ 1,129 810
PROPERTY, PLANT AND EQUIPMENT
Land........................................ 192 170
Buildings and improvements.................. 684 661
Machinery and equipment..................... 2,582 2,390
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3,458 3,221
Less allowances for depreciation............ 1,467 1,352
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1,991 1,869
Construction in progress.................... 140 94
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2,131 1,963
FRANCHISE AND OTHER NONCURRENT ASSETS......... 6,115 5,965
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$ 9,375 $ 8,738
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See Notes to Condensed Consolidated Financial Statements.
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions except share data)
June 30, December 31,
LIABILITIES AND SHARE-OWNERS' EQUITY 1995 1994
-------- ------------
(Unaudited)
CURRENT
Accounts payable and accrued expenses....... $ 907 $ 798
Current maturities of long-term debt........ 36 291
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Total Current Liabilities................... 943 1,089
LONG-TERM DEBT................................ 4,331 3,896
DEFERRED INCOME TAXES......................... 2,122 1,884
OTHER LONG-TERM OBLIGATIONS................... 565 530
SHARE-OWNERS' EQUITY
Preferred stock, $35 stated value;
Authorized and issued - 1,000,000 shares.. 29 29
Common stock, $1 par value; Authorized -
500,000,000 shares; Issued - 144,911,744
and 143,841,182 shares, respectively...... 145 144
Paid-in capital............................. 1,312 1,301
Reinvested earnings......................... 115 70
Cumulative translation adjustment........... 49 21
Common stock in treasury, at cost
(15,150,298 and 14,636,598 shares,
respectively)............................. (236) (226)
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1,414 1,339
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$ 9,375 $ 8,738
======= =======
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<PAGE>
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Six Months ended
----------------------
June 30, July 1,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 49 $ 32
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.............................. 155 138
Amortization.............................. 93 89
Deferred income taxes..................... 22 26
Gain from sale of interest in bottling
operation............................... (9) -
Net changes in current assets and
current liabilities..................... (42) 34
Other nonoperating cash flows............. 5 3
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Net cash provided by operating activities..... 273 322
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.......................... (286) (197)
Proceeds from the sale of fixed assets........ 7 9
Acquisitions of and investments in businesses. (148) (7)
Proceeds from the sale of interest in
bottling operation........................... 17 -
Other investing activities..................... 6 -
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Net cash used in investing activities.......... (404) (195)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of debt............. 426 243
Payments on debt............................... (263) (265)
Dividends on common and preferred stock........ (2) (3)
Proceeds from the issuance of common stock..... 6 9
Purchases of treasury stock.................... (9) -
Other financing activities..................... (7) (18)
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Net cash provided by (used in) financing
activities................................... 151 (34)
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NET INCREASE IN CASH AND CASH EQUIVALENTS...... 20 93
Cash and cash equivalents at beginning
of period.................................. 22 11
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 42 $ 104
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See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
COCA-COLA ENTERPRISES INC.
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
Article 10 of Regulation S-X. Accordingly, they do not include all
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
For further information, refer to the consolidated financial statements and
footnotes included in the Coca-Cola Enterprises Inc. annual report on
Form 10-K for the year ended December 31, 1994.
Note B - Seasonality of Business
Operating results for the second quarter and six months ended June 30, 1995
are not indicative of the results that may be expected for the year ended
December 31, 1995 primarily due to the seasonality of the Company's business.
Unit sales of the Company's products are greater in the second and third
quarters due to seasonal factors.
Note C - Acquisitions and Divestitures
On January 27, 1995, the Company acquired all the issued and outstanding
shares of stock of the Wichita Coca-Cola Bottling Company ("Wichita") for
$150 million in cash. On January 1, 1995, the Company sold its 50% ownership
interest in The Coca-Cola Bottling Company of the Mid South ("Mid South") for
$17 million, resulting in a $9 million pretax gain ($0.04 per common share).
- 6 -
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COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note D - Long-Term Debt
Long-term debt including current maturities consists of the following
(in millions):
June 30, December 31,
1995 1994
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Commercial Paper.................... $ 1,003 $ 828
8.35% Notes, due 1995............... - 250
6.50% Notes, due 1997............... 300 300
7.00% Notes, due 1999............... 200 200
7.875% Notes, due 2002.............. 500 500
8.00% Notes, due 2005............... 250 250
8.50% Debentures, due 2012.......... 250 250
8.75% Debentures, due 2017.......... 154 154
8.35% Zero Coupon Notes, due 2020
(net of unamortized discount
of $1,682)....................... 251 -
8.00% and 8.50% Debentures,
due 2022.......................... 1,000 1,000
6.75% Debentures, due 2023.......... 250 250
Other long-term obligations......... 209 205
-------- --------
$ 4,367 $ 4,187
======== ========
Maturities of long-term debt for the five twelve-month periods subsequent to
June 30, 1995 are as follows: 1996 - $36 million; 1997 - $30 million;
1998 - $314 million; 1999 - $7 million; and 2000 - $1,204 million.
The Company's commercial paper program is supported by a revolving bank credit
agreement maturing in December 1999 and two short-term credit facilities,
aggregating $1.2 billion. An aggregate $1 billion of commercial paper
supported by these agreements was outstanding at June 30, 1995. The weighted
average interest rate of borrowings under the commercial paper program at
June 30, 1995 was 6.1% per annum.
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<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note E - Income Taxes
The Company's effective tax rates for the first six months of 1995 and 1994
were 44% and 48%, respectively. A reconciliation of the income tax
provision at the statutory federal rate to the Company's actual income tax
provision follows (in millions):
Six Months Ended
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June 30, July 1,
1995 1994
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Statutory expense - 35%.................. $ 30 $ 21
State expense - net of federal........... 6 6
State net operating loss benefits -
net of federal......................... (4) (6)
State benefits valuation provision....... 4 6
Other, net............................... 2 1
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$ 38 $ 28
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Note F - Stock Options and Other Stock Plans
The Company's 1995 Stock Option Plan (the "1995 Option Plan") provides for
awards to officers and certain key employees of the Company. The total
number of shares of common stock that may be issued under the 1995 Option
Plan may not exceed 2,893,100 shares. Generally, options awarded under
the 1995 Option Plan (i) are granted at an exercise price of 100% or more
of the fair market value on the date of grant; (ii) vest ratably over a
three year period; and (iii) expire ten years from the date of grant.
An aggregate 539,200 options have been awarded under the 1995 Option Plan.
The option price for such awards was $17.875, representing the fair market
value of the Company's shares on the date of grant. An aggregate 415,862
shares of common stock have been issued during the first six months of 1995
as a result of the exercise of stock options under the Company's various
stock option plans.
The Company's 1995 Restricted Stock Award Plan (the "1995 Stock Plan")
provides for awards to officers and certain key employees of the Company.
The Company has reserved a total of 2,040,000 shares of common stock of the
Company for issuance under the 1995 Stock Plan. Awards under the 1995 Stock
Plan vest only upon attainment of stated increases in the market price of the
Company's common stock within five years from the date of grant, in which
event the ownership restrictions on the shares are removed. An aggregate
654,700 shares of common stock have been awarded under the 1995 Stock Plan.
- 8 -
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note F - Stock Options and Other Stock Plans (continued)
An aggregate 39,800 restricted shares previously awarded under various
restricted stock award plans of the Company were forfeited and added to
treasury stock during the first six months of 1995.
Note G - Share Repurchase Program
The Company has a share repurchase program under which it may repurchase up
to 10 million shares of its outstanding common stock. During the first
quarter of 1995, prior to the acquisition of Wichita, the Company repurchased
473,900 shares of common stock under the program for an aggregate cost of
approximately $9 million. The Company did not repurchase shares during the
second quarter of 1995. Cumulative repurchases total approximately two
million shares under the program. On July 27, 1995, the Company announced
its intent to again begin to repurchase shares under the program effective
immediately using anticipated annual free cash flow of the Company.
Note H - Contingencies
The Company has provided letters of credit aggregating approximately $85
million principally in connection with self-insurance programs. The Company
has guaranteed payment of up to $240 million of indebtedness owed by
manufacturers supplying certain packaging used in the Company's manufacturing
process. At June 30, 1995, these manufacturers had approximately $130
million of indebtedness outstanding guaranteed by the Company.
The Company incurs costs for the required removal, replacement, or
modification of underground fuel storage tanks, and any required soil and
groundwater remediation resulting from leaking tanks, to satisfy regulations
now in effect and which go into effect in varying stages through 1998. The
Company also incurs costs in connection with other environmental programs
covering the discharge of materials and waste water treatment. The Company
believes that any amount it may be required to pay in excess of amounts
accrued would not have a material adverse effect on its financial condition,
cash flows or results of operations.
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<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note H - Contingencies (continued)
The Company has been named as a potentially responsible party ("PRP") for
the costs of remediation of hazardous waste at federal or state Superfund
sites. Under current law, the Company's liability for clean-up of Superfund
sites may be joint and several with other PRPs, regardless of the extent of
the Company's use in relation to other users. As to any site where the
Company has determined that it may be liable, the Company has determined
that there are other PRPs who are financially solvent as well, and that
any hazardous waste deposited by the Company is minimal compared to amounts
deposited by other financially solvent PRPs. As a result, the Company
believes that any ultimate liability will not have a material effect on its
financial condition, cash flows or results of operations.
Part I. Financial Information
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
OPERATIONS REVIEW
Business Strategy
Through the implementation and execution of operating and financial
strategies designed to build value in our Company, we expect to accomplish
our primary goal -- the enhancement of share-owner value.
Our principal operating goal is to increase long-term operating cash flow
through profitable increases in sales volume. The liquid nonalcoholic
refreshment business is becoming increasingly complex and competitive as
products, packages, customers and marketing channels become more
sophisticated and diverse. This increased complexity requires that we
develop and execute innovative marketing programs at the local level.
In order to obtain profitable increases in case sales, the competitive
environment requires that we balance volume growth with improved margins
and sustainable increases in market share. We intend to grow our volume
through profitable business partnerships with our customers and superior
marketing to our consumers.
Our primary financial objective is to achieve an optimal capital structure
which provides the financial flexibility for internal projects, share
repurchases and acquisitions, and then to repay debt.
- 10 -
<PAGE>
Operations Overview
Gross profit margins decreased during the second quarter from 38.7% in 1994
to 36.9% in 1995. Six-month 1995 gross profit margins decreased from 39%
in 1994 to 37.5% in 1995. These decreases primarily resulted from the effect
of the significant packaging cost increases experienced by the industry. We
produced operating margins of 9.1% during the second quarter of 1995,
compared to 9.3% during the second quarter of 1994, and 7.4% for the first
six months of 1995 compared to 7.5% for the first six months of 1994.
Although these margins decreased, we were able to grow gross profit and
operating income by approximately 8% and 11%, respectively, in both the
second quarter and first six months of 1995. Net income margins improved
over the second quarter and first six months of 1994 reflecting, in addition
to our solid operating performance, favorable net interest expense as a
percent of net revenues and a lower effective tax rate.
Second-quarter 1995 net income per common share increased approximately 21%
over second-quarter 1994. Excluding the gain realized on the sale of our
investment in Mid South, six-month 1995 net income per common share increased
approximately 38% over the same prior year period.
Cash Operating Profit
Cash operating profit (operating income before deductions for depreciation
and amortization) increased approximately 11% and 10% in the second quarter
and first six months of 1995, respectively, over the same periods of 1994.
Assuming the Wichita acquisition occurred on January 1, 1994, second-quarter
and six-month 1995 cash operating profit would have increased approximately
9% over the same prior year periods. We continue to expect full-year 1995
growth in cash operating profit of approximately 8%, adjusting for the impact
of acquisitions and assuming no significant changes in the current
competitive environment.
Revenues and Volume
Net operating revenues for the second quarter of 1995 on an actual and
constant territory basis increased approximately 13% and 12%, respectively,
over the same prior year period. The increase in actual net operating
revenues resulted primarily from an approximate 6 1/2% increase in bottle
and can physical case sales volume, and an approximate 7% increase in bottle
and can net revenues per case. Constant territory bottle and can physical
case sales volume for the second quarter of 1995 increased approximately
4 1/2% over 1994.
Net operating revenues for the first six months of 1995 on an actual and
constant territory basis increased approximately 12% and 11%, respectively,
over the same prior year period. The increase in actual net operating
revenues resulted primarily from an approximate 4% increase in bottle and
can physical case sales volume and an approximate 7% increase in bottle
and can net revenues per case. Constant territory bottle and can physical
case sales volume for the first six months of 1995 increased approximately
3% over 1994.
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<PAGE>
Revenues and Volume (continued)
Solid volume growth in the second quarter of 1995 reflects the performance
of core soft drink brands, including Coca-Cola classic, diet Coke and double
digit growth in Sprite. Although noncarbonated beverages make up less than
5% of total cases sold, high growth in these products contributed
significantly to our second-quarter 1995 volume growth. The second-quarter
1995 volume growth rate also benefitted from volume during the Easter holiday,
which occurred in the second quarter in 1995 compared to the first quarter in
1994.
While we expect continued constant territory bottle and can physical case
sales volume growth for full-year 1995, we do not anticipate that volume
growth will reach the full-year growth rate of 4 1/2% attained in 1994.
The increase in second-quarter and six-month 1995 bottle and can net
revenues per case primarily reflects significantly higher net selling prices
resulting from the higher cost of packaging.
Cost of Sales
Primarily as a result of packaging cost increases, cost of sales per case in
the second quarter and first six months of 1995 exceeded same-period 1994
costs by approximately 11% and 9 1/2%, respectively. The effect of foreign
currency translation increased cost of sales per case by approximately 1%
in both the second quarter and first six months of 1995. Cost of sales per
case was higher in the second quarter of 1995 compared to the first quarter
of 1995, as the first quarter benefitted from year-end 1994 inventories with
lower carrying costs. We expect full-year 1995 bottle and can cost of sales
per case to increase in the range of 8% to 10%, excluding any effect of
foreign currency translations.
Selling, General and Administrative Expenses
Constant territory selling, general and administrative expenses increased
approximately 6% during the second quarter and first six months of 1995,
compared to the same periods of 1994. This increase is principally a result
of selling and delivery infrastructure investments associated with our
increased cold drink channel development and noncarbonated product
introductions. Selling, general and administrative expenses as a percent of
sales decreased from 29.4% of sales in the second quarter of 1994 to 27.8% of
sales in the second quarter of 1995, and from 31.6% of sales in the first six
months of 1994, to 30.1% of sales in the first six months of 1995.
Interest Expense
The weighted average interest rate for the first six months of 1995 increased
to 7.4% from 7.2% for the first six months of 1994. Given the current rate
environment, we anticipate that net interest expense will be in the range
of $325 million to $330 million for full-year 1995.
- 12 -
<PAGE>
Income Taxes
The Company's effective tax rates for the first six months of 1995 and 1994
were approximately 44% and 48%, respectively. The change in the effective
tax rate between the periods is principally the result of the difference
in full-year earnings expectations.
CASH FLOW AND LIQUIDITY REVIEW
Capital Resources
Our sources of capital include, but are not limited to, the issuance of
public or private placement debt, bank borrowings and the issuance of equity
securities. In addition to our operating cash flows, we believe that
adequate long-term and short-term capital resources are available to satisfy
our capital expenditure, acquisition and share repurchase programs; and to
satisfy scheduled debt maturities, interest payments, income tax obligations,
and dividend payments to our share owners.
Long-term Capital Resources: The Company has unissued debt securities in the
amount of $621 million available under a shelf registration with the
Securities and Exchange Commission, in addition to the availability of equity
and new issue debt securities markets as a source of long-term financing.
Short-term Capital Resources: We satisfy seasonal working capital needs and
other financing requirements with short-term borrowings under our commercial
paper program. Our commercial paper program is supported by a revolving bank
credit agreement maturing in December 1999 and two short-term credit
facilities, aggregating $1.2 billion.
An aggregate $1 billion of commercial paper borrowings supported by these
agreements was outstanding at June 30, 1995. The Company intends to
refinance borrowings under its commercial paper program either through
continued short-term borrowings or long-term financing.
Summary of Cash Activities
Cash and cash equivalents increased approximately $20 million in the first
six months of 1995. Our principal sources of cash consisted of those
provided from operations of $273 million and the issuance of debt aggregating
$426 million. Our primary uses of cash were capital expenditures totaling
$286 million, payments on debt aggregating $263 million, and the acquisition
of Wichita for a cost of $148 million (net of cash acquired).
Operating Activities: Net cash provided by operating activities in the first
six months of 1995 decreased from the first six months of 1994, primarily as
a result of increased inventory balances caused mainly by higher packaging
costs. The increase in depreciation expense in 1995 reflects the effects of
capital spending and the acquisition of Wichita during the first quarter
of 1995.
- 13 -
<PAGE>
Summary of Cash Activities (continued)
Investing Activities: Cash used in investing activities increased in the
first six months of 1995 compared to the first six months of 1994, primarily
as a result of the acquisition of Wichita and increased capital spending.
Our annual capital expenditure requirements are expected to be financed
primarily with funds generated from operating activities. We expect capital
expenditures for full-year 1995 to approximate $400 million.
In the past nine years, the Company has acquired a number of bottling
companies for an aggregate purchase price of approximately $5.7 billion.
Our sources of capital allow us to maintain flexibility for acquisitions
that offer opportunities to implement our operating strategies and to
achieve an acceptable rate of return. We will continue to make domestic
and international acquisitions if and when such opportunities become
available and are expected to increase share-owner value over the long term.
Financing Activities: During the first quarter of 1995, prior to the
acquisition of Wichita, we repurchased 473,900 shares of our common stock
at a cost of approximately $9 million (an average of $18.26 per share).
On July 27, 1995, we announced our intent to again begin to repurchase
shares under the program effective immediately using anticipated annual
free cash flow.
FINANCIAL POSITION
The increase in trade accounts receivable, and accounts payable and accrued
expenses reflects the seasonal nature of our business. The increase in
inventory reflects packaging cost increases which went into effect on
January 1, 1995 and the seasonal nature of our business. The increase in
prepaid expenses and other assets results from the establishment of a
deferred tax asset related to a net operating loss carryforward which is
expected to be used to offset taxable income during the next twelve months.
The increase in franchise and other noncurrent assets reflects the increase
in franchise assets resulting from the acquisition of Wichita in January 1995,
offset by amortization expense. The increase in long-term debt results from
the financing of the Wichita acquisition, while the increase in deferred
taxes results from the tax effects of the acquisition and the
reclassification of the deferred tax asset. The increase in the cumulative
translation adjustment results from the decrease in the value of the dollar
against the Dutch florin during the first six months of 1995.
In March 1995, the Financial Accounting Standards Board issued Statement of
Accounting Standards 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." The Statement requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment under certain circumstances and their recoverable amounts written
down based on an analysis of expected future cash flow. The adoption of this
Statement will not have a material effect on the financial position or
results of operations of the Company as the Company's current accounting
policies provide for similar accounting treatment.
- 14 -
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
In June 1995, Midwest Coca-Cola Bottling Company ("Midwest CCBC"), a division
of Johnston Coca-Cola Bottling Group, Inc. ("Johnston CCBG"), received from
the United States Environmental Protection Agency an administrative complaint
under sections 311 and 312 of the Emergency Planning and Community Right-to-
Know Act ("EPCRA"), 42 U.S.C. sections 11021 and 11022, alleging thirteen
violations of EPCRA and proposing a penalty of $176,000. The alleged
violations all relate to reporting requirements. Midwest CCBC has filed an
answer to the complaint requesting a hearing.
A tentative agreement has been reached concerning settlement of litigation
filed in 1991 by Three Bridges Investment Company contesting the Company's
acquisition of Johnston CCBG. The settlement is contingent upon approval by
the court, following notice to share owners and a hearing. The settlement,
as proposed, would not involve the payment of any damages to the plaintiffs.
It would require that any proposed merger or consolidation with, purchase of
an equity interest in, or other acquisition of an entity or other ownership
interest, be approved by a committee of independent directors. It would also
require that the Company continue its share repurchase program for a period
of time, and that the defendants pay the plaintiffs' attorneys fees, to the
extent approved by the court.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
Incorporated by
Exhibit Reference or Filed
Number Description Herewith
------- --------------------------------- ------------------
12 Statements regarding computations Filed Herewith
of ratios
27 Financial Data Schedule Filed Herewith
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<PAGE>
(b) Reports on Form 8-K:
During the second quarter of 1995, the Company filed the following current
reports on Form 8-K:
Date of Report Description
-------------- -----------------------------------------------
April 17, 1995 Condensed Consolidated Statements of Operations
(unaudited) of the Company, filed on April 25,
1995, reporting financial results for the first
quarter of 1995.
May 12, 1995 Form of Purchase Agreement and Note for offer
and sale of Zero Coupon Notes due June 20, 2020.
SIGNATURES
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.
COCA-COLA ENTERPRISES INC.
(Registrant)
Date: August 8, 1995 /s/ JOHN R. ALM
--------------------------------
John R. Alm
Senior Vice President and
Chief Financial Officer
(On behalf of the Registrant and
as Principal Financial Officer)
Date: August 8, 1995 /s/ BERNICE H. WINTER
--------------------------------
Bernice H. Winter
Vice President and Controller
(Principal Accounting Officer)
- 16 -
<PAGE>
COCA-COLA ENTERPRISES INC. Exhibit 12
COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES AND RATIO OF
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(In millions except ratios)
Quarter ended Six Months ended
---------------- ----------------
July 1, July 1, July 1, July 1,
1995 1994 1995 1994
------- ------- ------- -------
Computation of Earnings:
Earnings from continuing operations
before income taxes. . . . . . . . . . $ 82 $ 73 $ 87 $ 60
Add:
Interest expense . . . . . . . . . . . 82 77 164 159
Amortization of capitalized
interest . . . . . . . . . . . . . . - - 1 -
Amortization of debt
premium/discount and expenses. . . . 1 1 1 1
Interest portion of rent expense . . . 3 2 5 5
---- ---- ---- ----
Earnings as Adjusted . . . . . . . . . . . $168 $153 $258 $225
==== ==== ==== ====
Computation of Fixed Charges:
Interest expense . . . . . . . . . . . . $ 82 $ 77 $164 $159
Capitalized interest . . . . . . . . . . 1 1 2 1
Amortization of debt
premium/discount and expenses. . . . . 1 1 1 1
Interest portion of rent expense . . . . 3 2 5 5
---- ---- ---- ----
Fixed Charges. . . . . . . . . . . . . . . 87 81 172 166
Preferred stock dividends (a). . . . . . 1 1 2 2
---- ---- ---- ----
Combined Fixed Charges and Preferred
Stock Dividends. . . . . . . . . . . . . $ 88 $ 82 $174 $168
==== ==== ==== ====
Ratio of Earnings to Fixed Charges . . . . 1.93 1.89 1.50 1.36
==== ==== ==== ====
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends. . 1.91 1.87 1.48 1.34
===== ==== ==== ====
(a) Preferred stock dividends have been increased to an amount representing
the pretax earnings which would be required to cover such dividend
requirements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE FILER FOR THE PERIOD ENDED JUNE 30, 1995
INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30,
1995 (COMMISSION FILE NO. 001-09300) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000804055
<NAME> COCA-COLA ENTERPRISES
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 42
<SECURITIES> 0
<RECEIVABLES> 624
<ALLOWANCES> 36
<INVENTORY> 283
<CURRENT-ASSETS> 1129
<PP&E> 3598
<DEPRECIATION> 1467
<TOTAL-ASSETS> 9375
<CURRENT-LIABILITIES> 943
<BONDS> 4331
<COMMON> 145
0
29
<OTHER-SE> 1240
<TOTAL-LIABILITY-AND-EQUITY> 9375
<SALES> 3289
<TOTAL-REVENUES> 3289
<CGS> 2054
<TOTAL-COSTS> 2054
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162
<INCOME-PRETAX> 87
<INCOME-TAX> 38
<INCOME-CONTINUING> 49
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
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