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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 September 29, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-09300
(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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock.
128,493,015 Shares of $1 Par Value Common Stock as of November 6, 1995
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<PAGE>
COCA-COLA ENTERPRISES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 29, 1995
INDEX
Page
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Part I - Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the Quarters
ended September 29, 1995 and September 30, 1994....................... 1
Condensed Consolidated Statements of Operations for the Nine Months
ended September 29, 1995 and September 30, 1994....................... 2
Condensed Consolidated Balance Sheets as of September 29, 1995
and December 31, 1994................................................. 3
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended September 29, 1995 and September 30, 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...................................... 14
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
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September 29, September 30,
1995 1994
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Net Operating Revenues............................ $ 1,841 $ 1,595
Cost of sales..................................... 1,183 994
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Gross Profit...................................... 658 601
Selling, general and administrative expenses...... 513 475
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Operating Income.................................. 145 126
Interest expense, net............................. 82 76
Other nonoperating deductions, net................ - -
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Income Before Income Taxes........................ 63 50
Income tax expense................................ 27 24
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Net Income........................................ 36 26
Preferred stock dividend requirements............. 1 1
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Net Income Applicable to Common Share Owners...... $ 35 $ 25
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Average Common Shares Outstanding................. 129 130
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Net Income Per Common Share....................... $ 0.27 $ 0.19
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Dividends Per Common Share........................ $0.0125 $0.0125
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See Notes to Condensed Consolidated Financial Statements.
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions except per share data)
Nine Months ended
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September 29, September 30,
1995 1994
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Net Operating Revenues........................ $ 5,130 $ 4,524
Cost of sales................................. 3,237 2,780
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Gross Profit.................................. 1,893 1,744
Selling, general and administrative expenses.. 1,505 1,399
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Operating Income.............................. 388 345
Interest expense, net......................... 244 233
Other nonoperating deductions, net............ 3 2
Gain from sale of interest in bottling
operation.................................... 9 -
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Income Before Income Taxes.................... 150 110
Income tax expense............................ 65 52
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Net Income.................................... 85 58
Preferred stock dividend requirements......... 2 2
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Net Income Applicable to Common Share Owners.. $ 83 $ 56
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Average Common Shares Outstanding............. 129 130
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Net Income Per Common Share................... $ 0.64 $ 0.43
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Dividends Per Common Share.................... $0.0375 $0.0375
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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)
September 29, December 31,
ASSETS 1995 1994
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(Unaudited)
CURRENT
Cash and cash equivalents..................... $ - $ 22
Trade accounts receivable, less allowances
of $36 and $34, respectively................ 504 467
Inventories:
Finished goods.............................. 202 170
Raw materials............................... 60 41
Other....................................... 26 25
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288 236
Prepaid expenses and other assets............. 217 85
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Total Current Assets.......................... 1,009 810
PROPERTY, PLANT AND EQUIPMENT
Land.......................................... 194 170
Buildings and improvements.................... 689 661
Machinery and equipment....................... 2,682 2,390
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3,565 3,221
Less allowances for depreciation.............. 1,539 1,352
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2,026 1,869
Construction in progress...................... 128 94
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2,154 1,963
FRANCHISE AND OTHER NONCURRENT ASSETS........... 5,998 5,965
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$ 9,161 $ 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)
September 29, December 31,
LIABILITIES AND SHARE-OWNERS' EQUITY 1995 1994
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(Unaudited)
CURRENT
Accounts payable and accrued expenses............ $ 793 $ 798
Current maturities of long-term debt............. 51 291
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Total Current Liabilities........................ 844 1,089
LONG-TERM DEBT..................................... 4,251 3,896
DEFERRED INCOME TAXES.............................. 2,059 1,884
OTHER LONG-TERM OBLIGATIONS........................ 592 530
SHARE-OWNERS' EQUITY
Preferred stock, $35 stated value;
Authorized and issued - 1,000,000 shares....... 30 29
Common stock, $1 par value; Authorized - 500,000,000
shares; Issued - 144,992,647 and 143,841,182
shares, respectively........................... 145 144
Paid-in capital.................................. 1,316 1,301
Reinvested earnings.............................. 148 70
Cumulative translation adjustment................ 40 21
Common stock in treasury, at cost
(16,387,598 and 14,636,598 shares, respectively). (264) (226)
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1,415 1,339
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$ 9,161 $ 8,738
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Nine Months ended
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September 29, September 30,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................... $ 85 $ 58
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation............................. 235 209
Amortization............................. 140 134
Deferred income taxes.................... 40 48
Gain from sale of interest in bottling
operation.............................. (9) -
Net changes in current assets and current
liabilities............................ (56) 42
Other nonoperating cash flows............ 5 (5)
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Net cash provided by operating activities....... 440 486
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................ (397) (254)
Proceeds from the sale of fixed assets.......... 11 13
Acquisitions of and investments in businesses... (148) (12)
Proceeds from the sale of interest in bottling
operation..................................... 17 -
Other investing activities...................... 3 -
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Net cash used in investing activities........... (514) (253)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of debt.............. 368 385
Payments on debt................................ (276) (540)
Dividends on common and preferred stock......... (4) (5)
Proceeds from the issuance of common stock...... 8 12
Purchases of treasury stock..................... (37) (4)
Other financing activities...................... (7) (23)
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Net cash provided by (used in) financing activities 52 (175)
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NET DECREASE IN CASH AND CASH EQUIVALENTS....... (22) 58
Cash and cash equivalents at beginning of period 22 11
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CASH AND CASH EQUIVALENTS AT END OF PERIOD...... $ - $ 69
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See Notes to Condensed Consolidated Financial Statements.
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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
(GAAP) 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, as amended on November 3, 1995, for the year ended December 31, 1994.
Note B - Seasonality of Business
Operating results for the third quarter and first nine months ended September
29, 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
In January 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. Also in January 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).
On October 12, 1995, the Company announced the signing of a non-binding letter
of intent to acquire all the issued and outstanding shares of stock of the
Ouachita Coca-Cola Bottling Company, Inc. ("Ouachita") for a total transaction
value (purchase price plus acquired debt) of approximately $313 million. The
purchase price will be paid in cash, or shares of the Company's common stock,
or a combination of cash and stock, at the election of individual Ouachita
share owners. The Ouachita bottling operations are located in sections of
Arkansas, Louisiana and Mississippi. The proposed transaction is subject to
negotiation of a definitive purchase agreement, among other things, and is
expected to close by early 1996. As discussed above, the Company's 50%
interest in Mid-South was sold in January 1995 to Ouachita and will be
reacquired by the Company as a result of the acquisition.
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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):
September 29, December 31,
1995 1994
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Commercial Paper................................. $ 945 $ 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 $1,677).................. 256 -
8.00% and 8.50% Debentures, due 2022............. 1,000 1,000
6.75% Debentures, due 2023....................... 250 250
Other long-term obligations...................... 197 205
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$ 4,302 $ 4,187
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Maturities of long-term debt for the five twelve-month periods subsequent to
September 29, 1995 are as follows: 1996 - $51 million; 1997 - $7 million;
1998 - $314 million; 1999 - $8 million; and 2000 - $1,149 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 $945 million of commercial paper
supported by these agreements was outstanding at September 29, 1995. The
weighted average interest rate of borrowings under the commercial paper
program at September 29, 1995 was 5.9% 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 nine 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):
Nine Months Ended
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September 29, September 30,
1995 1994
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Statutory expense - 35%............................ $ 53 $ 38
State expense - net of federal..................... 10 10
State net operating loss benefits - net of federal (7) (5)
State benefits valuation provision................. 7 5
Other, net......................................... 2 4
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$ 65 $ 52
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Note F - Stock Options and Other Stock Plans
An aggregate 539,200 options have been awarded under the Company's 1995 Stock
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
496,765 shares of common stock were issued during the first nine months of
1995 as a result of the exercise of stock options under the Company's various
stock option plans.
The Company has reserved a total of 2,040,000 shares of common stock of the
Company for issuance under the Company's 1995 Restricted Stock Award Plan.
During the first nine months of 1995, an aggregate 654,700 shares of common
stock were awarded under the plan. 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 nine months of
1995.
Note G - Share Repurchase Program
The Company repurchased 1,237,300 and 1,711,200 shares of common stock during
the third quarter and first nine months of 1995 under its share repurchase
program for an aggregate cost in 1995 of approximately $37 million.
Cumulative repurchases since inception of the program in 1994 total
approximately 3.3 million shares.
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<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note H - Contingencies
The Company has provided letters of credit aggregating approximately $91
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 September 29, 1995, these manufacturers had approximately $151
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.
The Company has been named as a potentially responsible party ("PRP") for the
costs of remediation of hazardous waste at certain federal and 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.
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<PAGE>
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.
Operations Overview
Although gross margins were affected by the significant packaging cost
increases experienced by the industry, net revenues per case increases, volume
growth, and control of our operating expenses enabled us to maintain our
operating margins at 7.9% for the third quarter of 1995 and at 7.6% for the
first nine months of 1995 when compared to the same periods in 1994. Gross
profit margins decreased from 37.7% in 1994 to 35.7% in 1995, and for the
first nine months from 38.5% in 1994 to 36.9% in 1995. Net income margins
improved over the third quarter and first nine 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.
Third-quarter 1995 net income per common share increased approximately 42%
over third-quarter 1994. Excluding the gain realized on the sale of our
investment in Mid South, nine-month 1995 net income per common share increased
approximately 39% over the same prior year period.
Cash Operating Profit
Cash operating profit (operating income before the deduction for depreciation
and amortization) is one of the internal standards by which management
measures the Company's operating performance, providing a financial view of
the Company's performance from management's perspective. This measure should
be construed as a supplement to, and not as
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<PAGE>
an alternative to, operating income as an indicator of operating performance,
and cash flows from operating activities as a measure of liquidity, each as
determined in accordance with generally accepted accounting principles. Cash
operating profit increased approximately 12% and 11% in the third quarter and
first nine months of 1995, respectively, over the same periods of 1994.
Assuming the Wichita acquisition occurred on January 1, 1994, third-quarter
and nine-month 1995 cash operating profit would have increased approximately
10% and 9% in the third quarter and first nine months of 1995, respectively,
over the same prior year periods. Cash operating profit increased
approximately 12% in the fourth quarter of 1994. This represents a difficult
hurdle for our fourth quarter 1995 performance. However, we expect full-year
1995 growth in cash operating profit of approximately 8% to 9%, adjusting for
the impact of acquisitions and assuming no significant changes in the current
competitive environment.
Revenues and Volume
Net operating revenues for the third quarter of 1995, on an actual and
constant territory basis, increased approximately 15% and 14%, respectively,
over the same prior-year period. The increase in actual net operating
revenues resulted primarily from an approximate 8% 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 third quarter of 1995 increased approximately 6% over 1994.
Net operating revenues for the first nine months 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 5 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 first nine months of 1995 increased approximately 4%
over 1994.
The increase in third-quarter and nine-month 1995 bottle and can net revenues
per case primarily reflects significantly higher net selling prices required
to offset the higher cost of packaging. Solid volume growth in the third
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 third-quarter 1995 volume
growth. We continue to expect that full-year constant territory bottle and
can physical case sales volume growth rates will be slightly below the 1994
full-year growth rate of 4 1/2%.
Cost of Sales
Primarily as a result of packaging cost increases, cost of sales per case in
the third quarter and first nine months of 1995 exceeded same-period 1994
costs by approximately 11 1/2% and 10 1/2%, respectively. The effect of
foreign currency translation increased cost of sales per case by
approximately 1% in both the third quarter and first nine months of 1995.
We expect full-year 1995 bottle and can cost of sales per case to increase
8% to 10%, excluding any effect of foreign currency translations.
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Selling, General and Administrative Expenses
Constant territory selling, general and administrative expenses increased
approximately 6 1/2% during the third quarter and first nine 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 29.8% of sales in the third quarter of 1994 to 27.9% of sales in the third
quarter of 1995, and from 30.9% of sales in the first nine months of 1994,
to 29.3% of sales in the first nine months of 1995.
Interest Expense
The weighted average interest rate for the first nine months of 1995 was 7.5%
as compared to 7.2% for the first nine 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.
Income Taxes
The Company's effective tax rates for the first nine 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
share-owner dividends.
Long-term Capital Resources: During the third quarter of 1995, we filed a
shelf registration statement with the Securities and Exchange Commission for
an additional $1 billion in debt securities. Upon this registration statement
being declared effective by the Securities and Exchange Commission, we will
have an aggregate $1.6 billion of debt securities available for issuance. We
also have equity and new issue debt securities markets available to us 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 $945 million of commercial
paper borrowings supported by these agreements was outstanding at
September 29, 1995. The Company intends to refinance borrowings under its
commercial paper program either through continued short-term borrowings or
long-term financing.
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<PAGE>
Summary of Cash Activities
Cash and cash equivalents decreased approximately $22 million in the first
nine months of 1995. Our principal sources of cash consisted of those provided
from operations of $440 million and the issuance of debt aggregating $368
million. Our primary uses of cash were capital expenditures totaling $397
million, payments on debt aggregating $276 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
nine months of 1995 decreased from the first nine 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.
Investing Activities: Cash used in investing activities increased in the first
nine months of 1995 compared to the first nine 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 be approximately $450 to $500 million.
On October 12, 1995, the Company signed a non-binding letter of intent to
acquire all the issued and outstanding shares of stock of Ouachita for a total
transaction value (purchase price plus acquired debt) of approximately $313
million. The purchase price will be paid in cash, or shares of the Company's
common stock, or a combination of cash and stock, at the election of
individual Ouachita share owners. The Ouachita bottling operations are
located in sections of Arkansas, Louisiana and Mississippi. The proposed
transaction is subject to negotiation of a definitive purchase agreement,
among other things, and is expected to close by early 1996. The Company's 50%
interest in Mid-South was sold in January 1995 to Ouachita and will be
reacquired by the Company as a result of the acquisition. The Company will
finance this acquisition through long-term or short-term debt financings or
issuance of equity securities or a combination of each dependent upon the
method of payment selected by individual share owners of Ouachita and the
availability of each of these resources at the date of acquisition.
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 third quarter and first nine months of 1995,
we repurchased 1,237,300 and 1,711,200 shares of our common stock for a total
cost in 1995 of approximately $37 million (an average of $21.61 per share).
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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 reclassification 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 nine months of 1995.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("FAS 121"). The Statement requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. FAS 121
also addresses the accounting for long-lived assets that are expected to be
disposed of. The Company will adopt FAS 121 on January 1, 1996. The effect of
adoption is not expected to be material as the Company's current accounting
policies provide for similar accounting treatment.
Part II. Other Information
Item 1. Legal Proceedings
Agreement has been reached to settle the Environmental Protection Agency's
administrative complaint against Midwest Coca-Cola Bottling Company, a
division of the Company's subsidiary Johnston Coca-Cola Bottling Group, Inc.,
for $132,000. This matter was first reported in the Company's report on Form
10-Q for the period ended June 30, 1995.
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 Coca-Cola Bottling Group. 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.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
Exhibit Incorporated by Reference
Number Description or Filed Herewith
- ------- --------------------------------- -------------------------
12 Statements regarding computations Filed Herewith
of ratios
27 Financial Data Schedule Filed Herewith
(b) Reports on Form 8-K:
During the third quarter of 1995, the Company filed the following current
reports on Form 8-K:
Date of Report Description
- --------------- -----------------------------------------------
July 18, 1995 Condensed Consolidated Statements of Operations
(unaudited) of the Company, filed on July 19,
1995, reporting financial results for the second
quarter and first six months of 1995.
July 27, 1995 Reactivation of the share repurchase program using
annual estimated free cash flow.
- 15 -
<PAGE>
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: November 6, 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: November 6, 1995 /s/ Bernice H. Winter
--------------------------------
Bernice H. Winter
Vice President and Controller
(Principal Accounting Officer)
- 16 -
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 Nine Months ended
------------------- ------------------
Sept. 29, Sept. 30, Sept. 29, Sept.30,
1995 1994 1995 1994
--------- --------- --------- --------
Computation of Earnings:
Earnings from continuing operations
before income taxes. . . . . . . . $ 63 $ 50 $150 $110
Add:
Interest expense . . . . . . . . . 78 77 242 235
Amortization of capitalized
interest . . . . . . . . . . . . - - 1 1
Amortization of debt
premium/discount and expenses. . 5 1 6 2
Interest portion of rent expense . 2 2 7 7
---- ---- ---- ----
Earnings as Adjusted . . . . . . . . . $148 $130 $406 $355
==== ==== ==== ====
Computation of Fixed Charges:
Interest expense . . . . . . . . . . $ 78 $ 77 $242 $235
Capitalized interest . . . . . . . . 1 1 3 2
Amortization of debt
premium/discount and expenses. . . 5 1 6 2
Interest portion of rent expense . . 2 2 7 7
---- ---- ---- ----
Fixed Charges. . . . . . . . . . . . . 86 81 258 246
Preferred stock dividends (a). . . . 1 1 2 3
---- ---- ---- ----
Combined Fixed Charges and Preferred
Stock Dividends. . . . . . . . . . . $ 87 $ 82 $260 $249
==== ==== ==== ====
Ratio of Earnings to Fixed Charges . . 1.72 1.60 1.57 1.44
==== ==== ==== ====
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends. . . . . . . . . . . . . . 1.70 1.59 1.56 1.43
==== ==== ==== ====
(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 SEPTEMBER 29,
1995 INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 29, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-29-1995
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0
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