<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 01-09300
(COCA-COLA ENTERPRISES INC. LOGO)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 58-0503352
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
ONE COCA-COLA PLAZA, N.W., ATLANTA, GEORGIA 30313
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(404) 676-2100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
Common Stock, par value $1.00 per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
---------------------
Indicate by check mark whether the registrant (1) has filed all reports 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of Common Stock held by nonaffiliates of the
registrant as of March 3, 1995 was $1,222,113,322.
There were 128,932,299 shares of Common Stock outstanding as of March 3,
1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the Annual Meeting of
Share Owners to be held on April 17, 1995 are incorporated by reference in Part
III hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
COCA-COLA ENTERPRISES INC.
SELECTED FINANCIAL DATA
(In millions except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------------------------------------------------------------------
1991 1986(G)
------------------- ---------
PRO PRO
1994 1993(A) 1992(B) FORMA(C) REPORTED 1990(D) 1989(E) 1988(F) 1987 FORMA
------ ------- ------- -------- -------- ------- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS SUMMARY
Net operating revenues....... $6,011 $5,465 $5,127 $5,027 $3,915 $3,933 $3,822 $3,821 $3,327 $ 3,191
Cost of sales................ 3,703 3,372 3,219 3,170 2,420 2,400 2,350 2,303 1,953 1,872
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Gross profit................. 2,308 2,093 1,908 1,857 1,495 1,533 1,472 1,518 1,374 1,319
Selling, general and
administrative expenses.... 1,868 1,708 1,602 1,535 1,223 1,199 1,162 1,137 1,037 1,024
Provision for
restructuring.............. -- -- -- 152 152 9 -- 27 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Operating income............. 440 385 306 170 120 325 310 354 337 295
Interest expense, net........ 310 328 312 312 210 200 193 202 160 188
Other nonoperating income
(deductions), net.......... (3) (2) (6) (3) (2) 3 10 12 (4) (9)
Gain on sale of bottling
operations................. -- -- -- -- -- 56 11 104 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income (loss) before income
taxes and cumulative effect
of changes in accounting
principles................. 127 55 (12) (145) (92) 184 138 268 173 98
Income taxes:
Expense (benefit) excluding
rate change.............. 58 30 3 (17) (9) 91 66 115 85 77
Rate change -- federal..... -- 40 -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income (loss) before
cumulative effect of
changes in accounting
principles................. 69 (15) (15) (128) (83) 93 72 153 88 21
Cumulative effect of changes
in
accounting principles...... -- -- (171) -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net income (loss)............ 69 (15) (186) (128) (83) 93 72 153 88 21
Preferred stock dividend
requirements............... 2 -- -- 9 9 16 18 10 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net income (loss) applicable
to
common share owners........ $ 67 $ (15) $ (186) $ (137) $ (92) $ 77 $ 54 $ 143 $ 88 $ 21
====== ====== ====== ====== ====== ====== ====== ====== ====== ========
OTHER OPERATING DATA
Depreciation expense......... $ 282 $ 254 $ 227 $ 205 $ 160 $ 150 $ 148 $ 143 $ 123 $ 108
Amortization expense......... 179 165 162 125 91 86 81 82 72 65
SHARE AND PER SHARE DATA
Average common shares
outstanding................ 130 129 129 129 116 119 130 139 140 140
Net income (loss) per common
share before cumulative
effect of changes in
accounting principles...... $ 0.52 $(0.11) $(0.11) $(1.06) $(0.79) $ 0.65 $ 0.41 $ 1.03 $ 0.63 $ 0.15
Net income (loss) applicable
to common share owners..... 0.52 (0.11) (1.45) (1.06) (0.79) 0.65 0.41 1.03 0.63 0.15
Dividends per common share... 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 --
Closing stock price.......... 18.00 15.25 12.25 15.38 15.38 15.50 16.00 15.00 14.25 14.25
YEAR-END FINANCIAL POSITION
Property, plant and
equipment, net............. $1,963 $1,890 $1,733 $1,706 $1,706 $1,373 $1,286 $1,180 $1,038 $ 850
Franchise and other
noncurrent assets.......... 5,965 6,046 5,651 4,265 4,265 3,153 2,952 3,001 2,760 2,539
Total assets................. 8,738 8,682 8,085 6,677 6,677 5,021 4,732 4,669 4,250 3,811
Long-term debt............... 4,187 4,391 4,131 4,091 4,091 2,537 2,305 2,211 2,157 1,804
Share-owners' equity......... 1,339 1,260 1,254 1,442 1,442 1,627 1,680 1,808 1,526 1,448
</TABLE>
18
<PAGE>
The Company changed its fiscal year end in 1991, from the Friday nearest
December 31 to a calendar year end. Accordingly, fiscal years presented are the
periods ended December 31, 1994, 1993, 1992 and 1991, December 28, 1990,
December 29, 1989, December 30, 1988, January 1, 1988 and January 2, 1987. The
Company acquired subsidiaries in each year presented and divested subsidiaries
in certain periods. Such transactions, except for (i) the acquisition of
Johnston, (ii) gains from the sale of certain bottling operations, and (iii)
acquisitions in 1986, did not significantly affect the Company's operating
results in any one fiscal period. All acquisitions and divestitures have been
included in or excluded from (as appropriate) the consolidated operating results
of the Company from their respective transaction dates.
(A) A one-time charge of $40 million ($0.31 per common share) to increase
deferred income taxes resulted from a 1% increase in the corporate
marginal income tax rate in connection with the Omnibus Budget
Reconciliation Act of 1993.
(B) The adoption of FAS 106 and FAS 109 resulted in one-time charges to
income. Fiscal periods prior to 1992 were not restated for these
accounting changes.
(C) The pro forma Operations Summary, Other Operating Data and Share and
Per Share Data give effect to the acquisition of Johnston in December
1991, as though it had been completed at the beginning of 1991.
(D) In June 1990, the Company sold its interest in Coca-Cola Bottling
Company of Ohio and Portsmouth Coca-Cola Bottling Company. These
operations were sold to Johnston and, as a result of the 1991
acquisition of Johnston, were reacquired by the Company.
(E) In February 1989, the Company sold its wholly owned subsidiaries,
Goodwill Bottling Ltd. and Goodwill Bottling North Ltd.
(F) In December 1988, the Company sold a wholly owned subsidiary, The
Coca-Cola Bottling Company of Mid-America. The Mid-America operations
were sold to Johnston and, as a result of the 1991 acquisition of
Johnston, were reacquired by the Company.
(G) The Operations Summary, Other Operating Data and Share and Per Share
Data reflect pro forma amounts which give effect to 1986 acquisitions
as though they had been completed at the beginning of 1986.
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS STRATEGIES FOR ENHANCING SHARE-OWNER VALUE
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.
OPERATING STRATEGIES
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 drives our strategy of developing and
executing innovative marketing programs at the local level. The competitive
environment dictates our strategy to obtain profitable increases in case sales
by balancing volume growth with improved margins and sustainable increases in
market share. The realization of short-term profitability at the expense of
market share is inconsistent with our strategy. We will grow our volume through
profitable business partnerships with our customers and superior marketing to
our consumers.
FINANCIAL STRATEGIES
Our financial strategies add value through the allocation of funds to
projects and activities which generate returns in excess of our cost of capital
and increase share-owner value. One of our primary financial objectives is to
achieve an optimal capital structure which provides the financial flexibility
for internal projects, share repurchases and appropriately priced acquisitions.
BUSINESS OVERVIEW
Coca-Cola Enterprises Inc. ("the Company") is the world's largest marketer,
distributor and producer of bottle and can beverage products of The Coca-Cola
Company. Including our most recent acquisition in January 1995, we are the
Coca-Cola bottler within 38 states, the District of Columbia, the U.S. Virgin
Islands, the Islands of Tortola and Grand Cayman, and the Netherlands. In the
United States, we operate through exclusive and perpetual rights in territories
containing approximately 54% of the population and accounting for approximately
55% of all bottle and can products of The Coca-Cola Company sold. Approximately
90% of our product sales volume is generated through the sale of products of The
Coca-Cola Company. We are the principal Coca-Cola bottler in the five states in
the United States with the largest increases in population between 1990 and
1994.
EMPLOYEE OWNERSHIP
The goal of increasing long-term share-owner value is the primary mission
of our management. Summerfield K. Johnston, Jr., our chief executive officer and
vice chairman of our Board of Directors, and his family hold approximately 9% of
our outstanding shares. Through incentive stock award plans, savings and
investment plans, and direct personal ownership, directors and employees of the
Company own more than 15% of the Company's outstanding shares. We have
guidelines for share ownership by members of management and also encourage share
ownership at all levels throughout our organization. In addition to share
ownership, we have implemented incentive compensation programs which align our
managers' economic interests with those of our share owners.
20
<PAGE>
PARTNERSHIP WITH THE COCA-COLA COMPANY
The Coca-Cola Company is an integral business partner in our success. The
Coca-Cola Company is the sole supplier of syrup used in the majority of our
products, providing national advertising and a variety of local media
advertising and marketing program support. The chairman and three other members
of our Board of Directors are current or former executives of The Coca-Cola
Company, complementing other accomplished individuals who comprise directors
elected by our share owners. The Coca-Cola Company is our largest single share
owner, holding approximately 44% of our outstanding shares. The Company's
success, while principally dependent on our operating expertise in the beverage
industry, is enhanced by this relationship.
OPERATIONS REVIEW
The following review of the results of operations, financial condition and
cash flows of the Company should be read in conjunction with the Consolidated
Financial Statements and the accompanying Notes to Consolidated Financial
Statements ("Notes"). References are made in the following discussions to
specific Notes for additional information.
1994 in Review
Comparable Results: In the opinion of management, the most meaningful
comparison of operating results between 1994 and 1993 reflects 1993 (i)
excluding the impact of the Omnibus Budget Reconciliation Act on deferred income
taxes (as discussed later), and (ii) including the effect of 1993 acquisitions
as if they occurred on January 1, 1993. Accordingly, we refer to "comparable"
results in this section as the results of operations adjusted for these items.
Operating income and earnings per share increased significantly over 1993
levels. Volume increases, continued net revenues per case increases, and
moderate cost of sales per case increases generated favorable operating profit
performance in 1994. This performance, combined with reduced net interest
expense and a lower effective tax rate, produced significant earnings per share
growth. Comparable 1994 operating income increased approximately 13% over 1993
results, with comparable earnings per share applicable to common share owners
increasing 165% over 1993.
Cash operating profit (operating income before the deduction for
depreciation and amortization) is one of the key 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 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. Actual 1994 cash operating profit
increased approximately 12% over 1993, with comparable results increasing
approximately 9%. We believe that in 1995 we will again achieve our stated
long-term objective of 8% comparable cash operating profit growth. We plan to
achieve this objective through the successful implementation of our operating
strategies.
Net operating revenues are comprised principally of wholesale sales to
retailers which account for approximately 95% of our net sales and approximately
97% of our gross profit. Net operating revenues for 1994 increased approximately
10% over 1993, while comparable net operating revenues for 1994 increased
approximately 6%. The increase in comparable net revenues results from an
approximate 1/2% increase in domestic net revenues per case and an approximate
4 1/2% increase in bottle and can case sales volume.
Volume growth in 1994 resulted primarily from strong carbonated beverage
growth in our core brands, and was also aided by the introduction of new
products. Significant growth in noncarbonated products also contributed to total
volume growth in 1994; however, noncarbonated beverages represent less than 5%
of our total bottle and can case sales. While we expect continued
21
<PAGE>
volume growth in 1995, we do not anticipate that we will achieve growth equal
to the full-year comparable growth of 4 1/2% experienced in 1994. We also
experienced growth in 1994 comparable fountain gallon volume of 3 1/2% over
1993. This increase in fountain gallon volume did not have a significant effect
on our operating results as operating margins on fountain sales are relatively
low.
Net revenues per case increases in 1994 reflected a combination of net
selling price increases and a product mix shift into higher priced products,
packages and distribution channels. Trends within fourth-quarter 1994 compared
to fourth-quarter 1993 reflected steadily increasing net revenues per case
growth, with December 1994 selling prices ahead of December 1993 levels by
approximately 2 1/2%. Fourth-quarter 1994 selling price increases were
introduced as part of a strategy to counter the significant packaging cost
increases which occurred in January 1995, as discussed further below. Our
strategies for net revenues per case increases include varying levels of net
selling price increases and effective management of our product, package and
distribution channel mix. Reflecting our decentralized organization and
operating philosophy, these net revenues per case dynamics will be managed
locally, based on individual market conditions and opportunities.
Cost of wholesale sales per physical case for 1994 increased moderately
from 1993 levels. Actual cost of wholesale sales per case for 1994 increased
approximately 1/2% over 1993, while comparable domestic cost of sales decreased
approximately 1/2%. This decrease is primarily attributable to favorable
packaging cost decreases which more than offset ingredient cost increases. The
cost of aluminum increased significantly effective January 1, 1995, representing
the most significant increase in our industry in 20 years. This increase will
affect all beverage bottling industry participants in 1995 in varying degrees.
Based on January 1995 cost increases, we estimate that total cost of sales per
case for the first quarter of 1995 will increase by approximately 5% to 7% over
1994 levels. This increase would be approximately 8% to 10% without the
favorable effect resulting from the depletion of year-end 1994 inventory with
carrying costs significantly below our first-quarter 1995 costs. Compared to
1994 levels, cost of sales increases due to aluminum costs after the first
quarter of 1995 will be approximately 8% to 10%, dependent on aluminum market
conditions in the remainder of the year. To the extent such cost increases
cannot be offset by net revenues per case increases, our results of operations
could be negatively impacted. Based on current market conditions, we believe
that 1995 cost increases can be offset with the attainment of net revenues per
case increases; however, there is no assurance this will occur.
Selling, general and administrative expenses for 1994 increased
approximately 9% from 1993, primarily as a result of the increased case sales
volume and acquisitions during 1994 and 1993. Selling, general and
administrative expenses as a percentage of sales decreased slightly from 31.3%
in 1993 to 31.1% in 1994.
Interest expense decreased in 1994 when compared to 1993, reflecting the
decreased debt balance in 1994 and a lower weighted average borrowing rate of
7.2% for 1994 compared to 7.6% for 1993. We anticipate that interest expense
will increase approximately 10% in 1995 due to higher interest rates combined
with a higher debt balance resulting from acquisitions and share repurchases.
Income taxes decreased as a percentage of earnings before income taxes in
1994 when compared to 1993, reflecting a lower effective tax rate of
approximately 46% for 1994, compared to 55% (excluding the one-time charge) for
1993. The change in the effective tax rate from 1993 to 1994 is principally due
to the level of pretax income in each period and the relationship of
nondeductible expenses to pretax income.
22
<PAGE>
CASH FLOW AND LIQUIDITY REVIEW
Capital Resources
Our external 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. We believe that adequate long-term and short-term capital
resources, exclusive of our operating cash flows, 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: In addition to the availability of equity
markets as a source of long-term financing, the Company has registered debt
securities with the Securities and Exchange Commission under a shelf
registration enabling the Company to issue debt as necessary up to the amount
registered for issuance. Approximately $871 million of this shelf registration
remains unissued and may be issued from time to time at fixed or floating
interest rates, as selected by the Company at the time of issuance.
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 $828 million of commercial paper
borrowings supported by these agreements were outstanding at December 31, 1994.
The Company intends to refinance borrowings under its commercial paper program
on a long-term basis, either through continued short-term borrowings or through
other available sources of long-term financing.
Summary of Cash Activities
Cash and cash equivalents increased approximately $11 million in 1994. Our
principal sources of cash consisted of those provided from operations of $631
million and the issuance of debt aggregating $355 million. Our primary uses of
cash were for capital expenditures totaling $366 million and payments on debt
aggregating $562 million.
Cash Operating Activities
Net cash provided by operating activities in 1994 increased approximately
28% over 1993, primarily resulting from a higher income level in 1994 and
favorable working capital cash changes. The increase in depreciation expense in
1994 reflects the results of capital spending and acquisitions. The increase in
amortization expense in 1994 primarily reflects (i) franchise amortization
resulting from the full-year effect of the June 1993 acquisitions (refer to Note
2), (ii) additional restricted stock grants (refer to Note 9), and (iii)
first-time grants of performance-vested executive stock options (refer to Note
9).
Cash Taxes: During 1987, the Company filed elections under Section 338 of
the Internal Revenue Code relating to various bottling companies acquired in
1986. Tax operating loss carryforwards (which can be used to reduce future
taxable income) aggregating $840 million have arisen principally from
accelerated franchise amortization for tax purposes and the additional tax
deductions resulting from such elections. This acceleration begins declining in
1995. Because of declining deductions and anticipated future increases in
earnings, the Company expects its cash income tax obligations to increase
significantly beginning in 1996. In 1996, we estimate cash tax payments to be in
the range of $75 million to $100 million; however, this estimate will vary based
on actual levels of future earnings and the availability of future deductions
related to certain business activities, including acquisitions.
23
<PAGE>
Investing Activities
Our capital expenditure requirements are expected to be financed primarily
with funds generated from operating activities. Generally, cash flows from
operations and proceeds from the sale of assets during the past three years have
been sufficient to finance our capital expenditure requirements.
Cash used in investing activities decreased approximately 40% in 1994
primarily as a result of acquisition activity during 1993. Capital expenditures
in 1994 increased approximately 4% over 1993. We expect capital expenditures in
1995 to approximate $400 million.
Acquisition Cash Expenditures: In the past nine years, the Company has
acquired numerous bottlers for an aggregate purchase price of approximately $5.6
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 domestic and
international acquisitions provided such opportunities are expected to increase
share-owner value over the long term.
In January 1995, we purchased The Wichita Coca-Cola Bottling Company in
Wichita, Kansas, for an aggregate purchase price of $150 million in cash. The
acquired territories cover much of Kansas and portions of Colorado, Nebraska and
Missouri. Also in January 1995, we sold our investment in Jackson Coca-Cola
Bottling Company in Jackson, Mississippi, for $17 million in cash resulting in a
pretax gain of approximately $9 million ($0.04 per common share) in 1995.
Financing Activities
In 1994, we used $246 million for financing activities compared with 1993
when $133 million in cash funds were provided from financing activities. This
difference results primarily from using available cash to reduce our debt
balance by $207 million in 1994, compared to a net increase in debt of $154
million in 1993. Stock options exercised throughout 1994 provided cash of $15
million. In August 1994, we began a share repurchase program under which we may
repurchase up to ten million shares of our outstanding common stock. The amount
of shares repurchased and the length of time required to repurchase such shares,
will depend on our level of capital expenditures, acquisition opportunities,
other alternative uses of cash, and market conditions. We repurchased common
stock at a cost of $28 million under our share repurchase program in 1994 when
compared to $17 million during 1993. Other financing activities primarily
include a collateral deposit related to interest rate swaps, and changes in the
market value of Eurodollar futures contracts (refer to Note 5).
FINANCIAL POSITION
Assets
The increase in trade accounts receivable results primarily from increased
revenues in December 1994 when compared to December 1993. Increased December
1994 production levels resulted in an increase in ending inventories, and
accounts payable and accrued liabilities when compared to 1993. The decrease in
franchise and other noncurrent assets results primarily from amortization of
franchise assets.
Liabilities and Equity
Amounts due to The Coca-Cola Company in 1994 represent amounts payable for
purchases of ingredients and are net of $17 million in amounts receivable for
marketing support payments. Because of the timing of receipts for marketing
support payments in 1993, we had an amount due from The Coca-Cola Company at
December 31, 1993, of $13 million, net of $37 million in amounts payable for
purchases of ingredients. Total long-term debt decreased during 1994 reflecting
a $306 million increase in commercial paper, more than offset by net payments of
long-term debt
24
<PAGE>
aggregating $510 million. Lower debt balances decreased our net debt to total
capital ratio from approximately 59% at year-end 1993 to approximately 56% at
year-end 1994. Deferred income taxes increased $53 million in 1994 when compared
to 1993, primarily as a result of increased earnings during 1994. The favorable
change in the cumulative translation adjustment results from the strength of the
Dutch florin versus the dollar during 1994.
Contingencies
Legislation: We are subject to laws and regulations pertaining to special
soft drink taxes, forced deposit legislation, restrictive packaging measures and
escheats/unclaimed deposits. We have taken actions to mitigate the adverse
effects resulting from legislation which imposes additional costs on the Company
and to inform consumers of the resulting effects on product pricing. Such laws
and regulations are receiving increased attention by the legislatures of states
and by the Congress of the United States. We are presently unable to quantify
the impact on current and future operations which may result from legislation
enacted in the future, but we view this legislation to be potentially
significant if widely enacted.
Environmental Contingencies: We are responsible 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 which go into effect in varying stages through 1998. The Company
estimates completion of its tank removal and replacement program in 1995, with
related soil and groundwater remediation continuing through 2002. Expenditures
for tank removal, replacement and remediation are estimated to aggregate between
$20 million to $25 million through 2002. Ongoing environmental compliance costs,
including routine maintenance, monitoring and similar costs, are not
significant. The Company also incurs costs in connection with other
environmental programs covering the discharge of materials and waste water
treatment. The Company expects to spend an aggregate $15 million over the next
two years related to such programs. Long-term expenditures for these programs
are not currently estimable.
Expenditures aggregating $12 million, $9 million and $8 million were made
in 1994, 1993 and 1992 in connection with the above environmental programs. The
Company believes that any amount it may be required to pay in excess of amounts
recorded or disclosed above would not have a material adverse effect on its
financial condition, cash flow or results of operations.
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.
At January 30, 1995, there were six federal sites where the Company's
involvement or liability as a PRP was unresolved. In addition, there were eight
other federal and five state sites at which it had been concluded that the
Company has no responsibility, ultimate liability amounts would be less than
$100,000 or payments made to date by the Company would be sufficient to satisfy
all liability of the Company. 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 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 financially
solvent PRPs. The Company believes that any ultimate additional liability to the
Company will not have a material effect on its financial position or results of
operations.
INTEREST RATE AND CURRENCY RISK MANAGEMENT
Interest Rates: The Company uses interest rate swaps and other risk
management instruments to manage its fixed/floating debt profile (refer to Note
5). The use of interest rate swaps and other risk management instruments had a
favorable impact on interest expense of $12 million and $7 million in 1994 and
1993, respectively. A 1% increase or decrease in market interest rates would
25
<PAGE>
have increased or decreased interest expense for 1994 and 1993 by $8 million and
$4 million, respectively.
Interest rate derivatives generally involve exchanges of interest payments
based upon fixed and floating interest rates without exchanges of underlying
face (notional) amounts of the designated hedges. The Company continually
evaluates the credit quality of counterparties on interest rate swaps and other
risk management instruments and does not currently believe that there is a
significant risk of nonperformance by any of the counterparties.
Currency: Our international operations represented less than 5% of
consolidated net revenues and assets in 1994. However, as a result of our
Netherlands operations, we are exposed to fluctuations in the exchange rate for
the Dutch florin. We attempt to reduce our exposure to currency fluctuations
through the use of currency forwards and options which hedge certain
intercompany interest payments denominated in Dutch florins (refer to Note 5).
During 1994 and 1993, losses on currency forwards and options were less than $1
million in each year.
As currency exchange rates fluctuate, translation of the statements of
operations of international businesses into U.S. dollars affects comparability
of revenues and expenses between years. None of the components of consolidated
results of operations were materially affected by exchange rate fluctuations in
1994 and 1993.
COMPARISONS OF PREVIOUSLY REPORTED FISCAL PERIODS
Operations Review -- 1993 to 1992
Comparable Results: Operating results for 1993 and 1992 included
significant one-time charges and acquisitions which materially affected reported
results of operations and net income per common share.
1993: In 1993, (i) we amended our postretirement benefit plans resulting
in a decrease to postretirement benefit expense in 1993 of $31 million ($0.15
per common share); (ii) the Omnibus Budget Reconciliation Act was signed into
law resulting in a one-time, noncash earnings charge of $40 million ($0.31 per
common share) to adjust deferred taxes (refer to Note 12); and (iii) we acquired
significant bottling businesses in June 1993.
1992: In 1992, we adopted Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" (FAS
106), and Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(FAS 109). The cumulative effect of adopting FAS 106 and FAS 109 resulted in
one-time, noncash earnings charges of $148 million ($1.15 per common share) and
$23 million ($0.18 per common share), respectively (refer to Notes 11 and 12).
Also in 1992, the additional expense resulting from FAS 106 totaled $30 million
($0.14 per common share).
In the opinion of management, the most meaningful comparison of operating
results between 1993 and 1992 reflects (i) 1993 excluding the one-time income
tax charge and the results of operations of significant 1993 acquisitions; and
(ii) 1992 excluding one-time charges resulting from the adoption of FAS 106 and
FAS 109, and increased expense resulting from FAS 106. Accordingly, we refer to
"comparable" results in this section as the results of operations adjusted for
these items.
Operating income, earnings per share and cash operating profit increased
significantly in 1993 over 1992 levels. Cash operating profit (operating income
before the deduction for depreciation and amortization) is one of the key
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 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. Operating income and cash operating profit increased approximately
26% and 16% over
26
<PAGE>
1992, respectively. Comparable operating income and cash operating profit
increased approximately 12% and 8% over 1992, respectively. Comparable earnings
per share increased from $0.03 in 1992 to $0.20 in 1993.
Net operating revenues for 1993 increased approximately 7% over 1992,
driven primarily by an approximate 5 1/2% increase in actual bottle and can
physical case sales volume in 1993 achieved through volume increases and the
effects of acquisitions in 1993 and 1992. Comparable net operating revenues for
1993 increased approximately 4% over 1992, resulting from an approximate 1/2%
increase in net revenues per case and an approximate 2% increase in bottle and
can case sales volume. Net revenues per case increased in 1993 partially from
shifts into higher priced products and packages. Volume growth in 1993 was aided
by the introductions of new products in 1993 and our marketing efforts for these
products. Volume growth in 1993 for The Coca-Cola Company products and the soft
drink industry was significantly influenced by the fountain segment of the
business. We experienced comparable growth in fountain sales of approximately
8 1/2% in 1993.
Cost of wholesale sales per physical case for 1993 decreased approximately
1 1/2% from 1992, primarily attributable to favorable packaging and ingredient
costs. Comparable cost of sales per case for 1993, excluding fountain sales,
decreased approximately 2% from 1992.
Selling, general and administrative expenses for 1993 increased
approximately 6 1/2% over 1992, resulting primarily from increased case sales
volume and acquisitions during the year. Comparable selling, general and
administrative expenses as a percentage of sales increased from 30.8% in 1992 to
31.3% in 1993. Increases in administrative expenses are attributable to
achievement during 1993 of our fully implemented decentralized organizational
structure.
Interest expense increased in 1993 when compared to 1992, reflecting an
increase in the average debt balance resulting from acquisitions and a higher
weighted average borrowing rate resulting principally from fixed-rate financings
which occurred during 1992.
Income taxes increased in 1993 principally as a result of the Omnibus
Budget Reconciliation Act which increased the corporate marginal income tax rate
by 1%, from 34% to 35%. This rate change resulted in a one-time, noncash charge
of approximately $40 million ($0.31 per common share) necessary to adjust
deferred income taxes to the higher rate. Our effective tax rates for 1993 and
1992 were approximately 55% (excluding the one-time noncash charge) and 25%,
respectively. The change in the effective tax rate for 1993 from 1992 was
principally due to the level of pretax income in each period and the
relationship of nondeductible expenses to pretax income.
Cash Flows Review -- 1993 to 1992
Summary: Cash and cash equivalents increased approximately $5 million in
1993. Our principal sources of cash in 1993 consisted of those provided from
operations of $493 million and the issuance of debt aggregating $822 million.
Our primary uses of cash were capital expenditures totaling $353 million,
acquisitions of bottling companies for $287 million, and payments on debt
aggregating $668 million.
Cash Operating Activities: Net cash provided by operating activities in
1993 increased approximately 77% over 1992, primarily resulting from a decreased
net loss and favorable working capital cash changes. The increase in
depreciation and amortization expense in 1993 reflects the results of capital
spending and 1993 acquisitions. The 1993 increase in the deferred income tax
provision primarily reflects the $40 million one-time adjustment of deferred
taxes, in addition to pretax earnings during 1993.
Investing Activities: In 1993, we acquired bottling companies for an
aggregate purchase price of approximately $426 million, and at a cash cost of
$287 million (refer to Note 2).
27
<PAGE>
Financing Activities: In 1993, net cash was provided from financing
activities in the amount of $133 million, while we used $39 million for net
financing activities in 1992. The use of funds in 1992 results primarily from a
net reduction in our debt balance of $33 million.
OUTLOOK
Our merger with Johnston Coca-Cola Bottling Group, Inc. in 1991 initiated a
dramatic and strategic reorganization of the combined companies. In early 1992,
our new management team determined that the significant organizational and
operational changes required for the Company to operate successfully would take
approximately two years to implement. The basics of this reorganization were
substantially complete in 1993. Competitive pressures from within the
marketplace, and the unpredictable economic environment, present a constant
challenge to our industry. We believe our strong operating performance during
the two-year restructuring period, and in 1994, demonstrates that under
constantly changing business, economic and industry conditions, we are able to
achieve and even exceed our operating and financial objectives over the long
term. We also believe that positive trends in revenues, gross profit, earnings
per share and other important financial measures, demonstrate that we are
focused on, and capable of, providing value to our share owners into the future.
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
COCA-COLA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions except
per share data)
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Net Operating Revenues............................................. $6,011 $5,465 $5,127
Cost of sales (purchases from The Coca-Cola Company -- $1,683,
$1,392 and $1,308, respectively)................................. 3,703 3,372 3,219
------ ------ ------
Gross Profit....................................................... 2,308 2,093 1,908
Selling, general and administrative expenses....................... 1,868 1,708 1,602
------ ------ ------
Operating Income................................................... 440 385 306
Interest expense, net.............................................. 310 328 312
Other nonoperating deductions, net................................. 3 2 6
------ ------ ------
Income (Loss) Before Income Taxes and Cumulative Effect of
Accounting Changes............................................... 127 55 (12)
Income taxes:
Expense excluding rate change.................................... 58 30 3
Rate change -- federal........................................... - 40 -
------ ------ ------
Income (Loss) Before Cumulative Effect of Accounting Changes....... 69 (15) (15)
Cumulative effect of accounting changes:
Postretirement benefits (net of income taxes of $91)............. - - (148)
Income taxes..................................................... - - (23)
------ ------ ------
Net Income (Loss).................................................. 69 (15) (186)
Preferred stock dividend requirements.............................. 2 - -
------ ------ ------
Net Income (Loss) Applicable to Common Share Owners................ $ 67 $ (15) $ (186)
====== ====== ======
Average Common Shares Outstanding.................................. 130 129 129
====== ====== ======
Per Share Data:
Income (loss) before cumulative effect of accounting changes..... $ 0.53 $(0.11) $(0.11)
Cumulative effect of accounting changes:
Postretirement benefits....................................... - - (1.15)
Income taxes.................................................. - - (0.18)
Preferred stock dividend requirements............................ 0.01 - -
Net income (loss) applicable to common share owners.............. 0.52 (0.11) (1.45)
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
29
<PAGE>
COCA-COLA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................ $ 69 $ (15) $(186)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Cumulative effect of accounting changes..................... - - 171
Depreciation................................................ 282 254 227
Amortization................................................ 179 165 162
Deferred income taxes....................................... 46 60 (21)
Changes in current assets and current liabilities........... 58 22 (116)
Other nonoperating cash flows............................... (3) 7 42
----- ----- -----
Net cash provided by operating activities........................ 631 493 279
----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................................. (366) (353) (291)
Proceeds from the sale of property, plant and equipment.......... 18 19 20
Acquisitions of and investments in businesses, net of cash
acquired (amounts paid to The Coca-Cola Company were $260 in
1993 and $11 in 1992).......................................... (20) (287) (27)
Other investing activities....................................... (6) - -
----- ----- -----
Net cash used in investing activities............................ (374) (621) (298)
----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of debt............................... 355 822 2,218
Payments on debt................................................. (562) (668) (2,251)
Purchase of treasury stock....................................... (28) (17) -
Dividends on common and preferred stock.......................... (7) (6) (6)
Proceeds from issuance of common stock........................... 15 2 -
Other financing activities....................................... (19) - -
----- ----- -----
Net cash provided by (used in) financing activities.............. (246) 133 (39)
----- ----- -----
Net Increase (Decrease) in Cash and Cash Equivalents During the
Year........................................................... 11 5 (58)
Cash and cash equivalents at beginning of year................... 11 6 64
----- ----- -----
Cash and Cash Equivalents at End of Year......................... $ 22 $ 11 $ 6
===== ===== =====
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
30
<PAGE>
COCA-COLA ENTERPRISES INC.
CONSOLIDATED BALANCE SHEETS
(In millions except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------ ------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents, at cost..................................... $ 22 $ 11
Amounts due from The Coca-Cola Company................................. - 13
Trade accounts receivable, less allowances of $34 and $33,
respectively......................................................... 467 442
Inventories:
Finished goods...................................................... 170 134
Raw materials....................................................... 41 48
Other............................................................... 25 18
------ ------
236 200
Prepaid expenses and other assets...................................... 85 80
------ ------
Total Current Assets......................................... 810 746
PROPERTY, PLANT AND EQUIPMENT
Land................................................................... 170 163
Buildings and improvements............................................. 661 622
Machinery and equipment................................................ 2,390 2,132
------ ------
3,221 2,917
Less allowances for depreciation....................................... 1,352 1,121
------ ------
1,869 1,796
Construction in progress............................................... 94 94
------ ------
1,963 1,890
FRANCHISE AND OTHER NONCURRENT ASSETS.................................. 5,965 6,046
------ ------
$8,738 $8,682
====== ======
LIABILITIES AND SHARE-OWNERS' EQUITY
CURRENT
Accounts payable and accrued expenses.................................. $ 795 $ 699
Amounts due to The Coca-Cola Company................................... 3 -
Current maturities of long-term debt................................... 291 308
------ ------
Total Current Liabilities.................................... 1,089 1,007
LONG-TERM DEBT......................................................... 3,896 4,083
DEFERRED INCOME TAXES.................................................. 1,884 1,831
OTHER LONG-TERM OBLIGATIONS............................................ 530 501
SHARE-OWNERS' EQUITY
Preferred stock, $35 stated value -- 1,000,000 shares authorized and
issued............................................................... 29 29
Common stock, $1 par value -- Authorized -- 500,000,000 shares;
Issued 143,841,182 shares and 142,182,183 shares, respectively....... 144 142
Paid-in capital........................................................ 1,301 1,280
Reinvested earnings.................................................... 70 9
Cumulative translation adjustment...................................... 21 (3)
Common stock in treasury, at cost (14,636,598 shares and 13,004,598
shares, respectively)................................................ (226) (197)
------ ------
1,339 1,260
------ ------
$8,738 $8,682
====== ======
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
31
<PAGE>
COCA-COLA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF SHARE-OWNERS' EQUITY
(In millions except per share data)
<TABLE>
<CAPTION>
PREFERRED COMMON PAID-IN REINVESTED TRANSLATION TREASURY SHARE-OWNERS'
THREE YEARS ENDED DECEMBER 31, 1994 STOCK STOCK CAPITAL EARNINGS ADJUSTMENT STOCK EQUITY
--------------------------------------------- --------- ------ ------- ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991.................. $ - $ 141 $ 1,264 $ 224 $ - $ (187) $ 1,442
Issuance of shares under stock award plan..... - 1 11 - - - 12
Unamortized cost of restricted shares
issued...................................... - - (12) - - - (12)
Amortization of restricted shares cost........ - - 4 - - - 4
Dividends on common stock (per share-$0.05)... - - - (6) - - (6)
Net loss...................................... - - - (186) - - (186)
----- ----- ------- ----- ---- ------ -------
BALANCE AT DECEMBER 31, 1992.................. - 142 1,267 32 - (187) 1,254
Issuance of shares under stock award plan..... - - 6 - - - 6
Unamortized cost of restricted shares
issued...................................... - - (6) - - - (6)
Amortization of restricted shares cost........ - - 2 - - - 2
Conversion of executive deferred compensation
to equity................................... - - 9 - - - 9
Purchase of common stock for treasury......... - - - - - (17) (17)
Issuance of preferred stock
to effect acquisition....................... 29 - - - - - 29
Issuance of treasury stock to effect
acquisition................................. - - - (2) - 7 5
Exercise of employee stock options............ - - 2 - - - 2
Translation adjustment........................ - - - - (3) - (3)
Dividends on common stock (per share-$0.05)... - - - (6) - - (6)
Net loss...................................... - - - (15) - - (15)
----- ----- ------- ----- ---- ------ -------
BALANCE AT DECEMBER 31, 1993.................. 29 142 1,280 9 (3) (197) 1,260
Issuance of executive stock options........... - - 10 - - - 10
Unamortized cost of executive stock options... - - (10) - - - (10)
Issuance of shares under stock award plan..... - 1 20 - - - 21
Unamortized cost of restricted shares
issued...................................... - - (21) - - - (21)
Amortization of restricted shares and
executive stock options cost................ - - 7 - - - 7
Forfeiture of restricted shares issued........ - - 1 - - (1) -
Purchase of common stock for treasury......... - - - - - (28) (28)
Exercise of employee stock options............ - 1 14 - - - 15
Translation adjustment........................ - - - - 24 - 24
Dividends on common stock (per share-$0.05)... - - - (6) - - (6)
Dividends on preferred stock (see Note 7)..... - - - (2) - - (2)
Net income.................................... - - - 69 - - 69
----- ----- ------- ----- ---- ------ -------
BALANCE AT DECEMBER 31, 1994.................. $ 29 $ 144 $ 1,301 $ 70 $ 21 $ (226) $ 1,339
===== ===== ======= ===== ==== ====== =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
32
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation. The
Company's fiscal year ends on December 31. Certain previously reported amounts
have been reclassified to conform to the 1994 presentation.
Net Income (Loss) Per Common Share: Net income (loss) per common share is
computed by dividing net income (loss) applicable to common share owners by the
weighted average number of common shares outstanding.
Cash Equivalents: Cash equivalents include all highly liquid debt
instruments purchased with original maturities less than three months. The fair
value of cash and cash equivalents approximates their carrying amount.
Concentrations of Credit Risk: The Company sells products to chain store
and other customers and extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral. Exposure to losses
on receivables is principally dependent on each customer's financial condition.
The Company monitors its exposure to credit losses and maintains allowances for
anticipated losses.
Inventories: In the second quarter of 1994, the Company changed its method
of accounting for inventories from the last-in, first-out (LIFO) method to the
first-in, first-out (FIFO) method. The change did not have a significant effect
on results of operations for 1994, nor is it anticipated that it will have a
material effect on future periods. Prior to this change, the Company's inventory
costs would not have differed significantly under the two methods. The FIFO
method is the predominant accounting method used in the Company's industry.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost, less allowances for depreciation. Depreciation expense is computed using
the straight-line method over the estimated useful lives of the related assets.
The annual rates of depreciation are 3% to 5% for buildings and improvements and
7% to 34% for machinery and equipment. Leasehold improvements are amortized over
the remaining lease term.
Franchise Assets: The Company operates under franchise agreements with The
Coca-Cola Company and certain other licensers of nonalcoholic beverage products.
These agreements include certain production, distribution and marketing
performance obligations and give the Company the right to distribute and sell
products of the franchiser within a specified territory. The majority of our
products are covered by agreements which are perpetual in nature and reflect a
long and ongoing relationship with The Coca-Cola Company and other franchisers.
The Company's agreement covering its operations in the Netherlands is not
perpetual solely due to the fact that none of The Coca-Cola Company's franchise
agreements outside the United States are perpetual. The Company believes this
agreement will continue to be renewed upon expiration and that the economic
period of benefit is ongoing.
Franchise assets, which are stated at cost, are amortized on a
straight-line basis generally over the maximum allowed estimated period of
benefit of 40 years. Accumulated amortization amounted to $895 million and $738
million at December 31, 1994 and 1993, respectively.
Impairment of Long-Lived Assets: In the event that facts and circumstances
indicate that the cost of franchise assets or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the asset would be
compared to the asset's carrying amount to determine if a write-down to market
value or discounted cash flow value is required.
33
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Self Insurance: The Company is generally self-insured for losses and
liabilities related primarily to workers' compensation, health and welfare
claims, physical damage to property, business interruption resulting from
certain events, and comprehensive general, product and vehicle liability. Losses
are accrued based upon the Company's estimates of the aggregate liability for
claims incurred using certain actuarial assumptions followed in the insurance
industry and based on Company experience.
Environmental Compliance and Remediation: Environmental compliance costs
include ongoing maintenance, monitoring and similar costs. Such costs are
expensed as incurred. Environmental remediation costs are accrued, except to the
extent costs can be capitalized, when environmental assessments and/or remedial
efforts are probable, and the cost can be reasonably estimated. Environmental
costs which improve the condition of a property as compared to the condition
when constructed or acquired are capitalized.
Postretirement Benefits Other Than Pensions: In 1992, the Company adopted
FAS 106, a method of accounting for postretirement benefits by accrual of the
costs of such benefits during the periods employees provide service to the
Company. The Company previously accounted for such costs as expense when
incurred. The effect on years prior to 1992, representing that portion of future
retiree benefit costs related to past service of both active and retired
employees at the date of adoption, was reported in 1992 as the cumulative effect
of an accounting change.
Income Taxes: In 1992, the Company changed its method of accounting for
income taxes from the deferred method under Accounting Principles Board
Statement No. 11 to the liability method by adopting FAS 109. FAS 109 requires
that deferred tax liabilities and assets be established based on the difference
between the financial statement and income tax bases of assets and liabilities
using existing tax rates. The effect on years prior to 1992 of adopting FAS 109
was reported in 1992 as the cumulative effect of an accounting change.
Currency Translation: Assets and liabilities of the Netherlands operations
are translated from Dutch florins into dollars at the rate of exchange in effect
at the balance sheet date. Revenues and expenses are translated at average
monthly exchange rates prevailing during the year. Resulting translation
adjustments are reflected in share-owners' equity.
Derivative Financial Instruments: The Company employs (i) interest rate
swaps, futures, and options, and (ii) currency forwards and options in the
management of interest rate and currency exposures. The Company designates
interest rate swaps, futures and options as hedges of specific debt instruments
and recognizes interest differentials as adjustments to interest expense as the
differentials occur. Realized and unrealized gains and losses arising from
currency forwards and options are recognized in income as offsets to gains and
losses resulting from the underlying hedged transactions. The Company does not
hold or issue financial instruments for trading purposes.
Marketing Costs: The Company participates in various advertising and
marketing programs with The Coca-Cola Company and other franchisers. Certain of
the Company's costs incurred in connection with these programs are reimbursed.
All costs related to marketing and advertising the Company's products are
expensed in the period incurred or expensed ratably over the year in relation to
revenues or certain other performance measures.
NOTE 2. ACQUISITIONS AND DIVESTITURES
Upon acquisition of companies having franchise agreements, the Company owns
the right to market, distribute and produce beverage products of The Coca-Cola
Company and/or other beverage products in the territories of the acquired
companies. All the Company's acquisitions in
34
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1994, 1993 and 1992 have been accounted for under the purchase method of
accounting. Under the purchase method of accounting, the results of operations
of acquired companies are included in the consolidated statements of operations
of the Company as of their respective acquisition dates. The assets and
liabilities of acquired companies are included in the Company's consolidated
balance sheets at their estimated fair values on the date of acquisition.
In 1994, the Company acquired a bottling operation in Shelbyville, Kentucky
for an aggregate purchase price of approximately $6 million. In January 1994,
the Company purchased approximately 4% of the outstanding common stock (9% of
the voting shares) of The Coca-Cola Bottling Company of New York, Inc. ("KONY")
for $6 million in cash. The Company has a five year right of first refusal on
the KONY shares held by The Coca-Cola Company, with the option to enter into
negotiations with The Coca-Cola Company for its remaining shares after two
years. During 1994, the Company purchased approximately $8 million of the
preferred stock of a manufacturer supplying certain packaging used in the
Company's manufacturing process (refer to Note 15).
On June 30, 1993, the Company acquired, from The Coca-Cola Company, the
stock of (i) Coca-Cola Beverages Nederland B.V. in the Netherlands; (ii) Roddy
Coca-Cola Bottling Company, Inc. in Knoxville, Tennessee; and (iii) Coca-Cola
Bottling Company of Johnson City, in Johnson City, Tennessee for an aggregate
purchase price of $366 million in cash and assumed debt. The following presents
unaudited pro forma results of operations of the Company assuming these
acquisitions occurred as of January 1, 1992 (in millions except per share
amounts):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Net Operating Revenues........................................... $5,667 $5,538
Cost of sales.................................................... 3,535 3,547
------ ------
Gross Profit..................................................... 2,132 1,991
Selling, general and administrative expenses..................... 1,741 1,670
------ ------
Operating Income................................................. 391 321
Interest expense, net............................................ 334 325
Other nonoperating deductions, net............................... 2 7
------ ------
Income (Loss) Before Income Taxes and Cumulative Effect of
Accounting Changes............................................. 55 (11)
Income taxes:
Expense excluding rate change.................................. 30 4
Rate change -- federal......................................... 40 -
------ ------
Income (Loss) Before Cumulative Effect of Accounting Changes..... (15) (15)
Cumulative effect of accounting changes.......................... - (171)
------ ------
Net Income (Loss)................................................ $ (15) $ (186)
====== ======
Income (Loss) Before Cumulative Effect of Accounting Changes Per
Common Share................................................... $(0.11) $(0.11)
Net Income (Loss) Per Common Share............................... (0.11) (1.45)
Depreciation..................................................... $ 266 $ 248
Amortization..................................................... 172 175
</TABLE>
The foregoing summary of pro forma information reflects adjustments to give
effect to (i) interest expense on acquisition financing through issuance of
commercial paper at an annual interest rate of 3.8% for 1992 and 3.1% for the
preacquisition period in 1993; (ii) repayment of assumed debt; (iii)
amortization of the franchise assets acquired in the acquisition; and (iv) the
income tax effect of such pro forma adjustments.
35
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Also in separate transactions in 1993, the Company acquired bottling
operations in Arkansas and a design and engineering company. The aggregate
purchase price for these acquisitions approximated $60 million in common stock,
preferred stock and debt.
In separate transactions in 1992, the Company acquired bottling operations
in Quincy, Illinois; Manchester, Georgia; Erie, Pennsylvania; and Laredo, Texas.
The aggregate purchase price for these acquisitions approximated $40 million in
cash and debt.
Subsequent Acquisition and Divestiture Events -- In January 1995, the
Company acquired the bottling operations of The Wichita Coca-Cola Bottling
Company ("Wichita") for $150 million in cash. The Wichita bottling operations
are located in portions of Colorado, Kansas, Missouri and Nebraska. Also in
January 1995, the Company sold its investment in Jackson Coca-Cola Bottling
Company for $17 million in cash, resulting in a pretax gain of approximately $9
million which will be recognized in 1995.
NOTE 3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES consists of the following at
December 31 (in millions):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Trade accounts payable............................................... $224 $185
Deposits on containers and shells.................................... 62 53
Accrued advertising payable.......................................... 110 98
Accrued compensation payable......................................... 98 78
Accrued insurance payable............................................ 73 62
Accrued interest payable............................................. 84 98
Other accrued expenses............................................... 144 125
---- ----
$795 $699
==== ====
</TABLE>
NOTE 4. LONG-TERM DEBT, including current maturities, consists of the following
at December 31 (in millions):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Commercial Paper................................................. $ 828 $ 522
8.20% Notes, due 1994............................................ - 243
8.35% Notes, due 1995............................................ 250 250
6.50% and 7.875% Notes, due 1997................................. 300 550
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
8.00% and 8.50% Debentures, due 2022............................. 1,000 1,000
6.75% Debentures, due 2023....................................... 250 250
Other long-term obligations...................................... 205 222
------ ------
$4,187 $4,391
====== ======
</TABLE>
Aggregate maturities of long-term debt during the next five years are as
follows (in millions): 1995 -- $291; 1996 -- $36; 1997 -- $306; 1998 -- $9; and
1999 -- $1,030.
36
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $828 million of commercial paper
supported by these agreements was outstanding at December 31, 1994. The weighted
average interest rates of borrowings under the commercial paper program were
approximately 4.5% and 3.2% for 1994 and 1993, respectively.
The revolving bank credit agreement and/or the outstanding notes and
debentures contain various provisions which, among other things, require the
Company to (i) maintain a defined leverage ratio and (ii) limit the incurrence
of certain liens or encumbrances in excess of defined amounts. None of these
restrictions negatively impact the Company's liquidity or capital resources at
this time.
NOTE 5. DERIVATIVE FINANCIAL INSTRUMENTS
Interest Rate Risk Management: The Company uses interest rate swaps and
other risk management instruments to manage its fixed/floating debt profile. The
use of interest rate swaps and other risk management instruments had a favorable
impact on interest expense of $12 million and $7 million in 1994 and 1993,
respectively. Significant instruments held by the Company at December 31, 1994
and 1993, are described below.
At December 31, 1994 and 1993, the Company was party to an interest rate
swap with a notional amount of $150 million. This swap, which expires in
December 1996, changes the floating interest rate exposure on $150 million of
commercial paper to fixed interest rate exposure.
At December 31, 1994 and 1993, the Company was party to two additional
interest rate swaps with notional amounts totaling $493 million and $500
million, respectively, which changed fixed interest rate exposure on certain
debentures to floating interest rate exposure. These swaps change the interest
rate exposure of (i) the $250 million 8% debentures due 2022 and (ii) $243
million and $250 million at December 31, 1994 and 1993, respectively, of the
$750 million 8.5% debentures due 2022. The notional amounts of these swaps are
amortized (i.e., reduced) quarterly based on interest rate fluctuations. The
notional amount ($250 million) of the swap entered into in 1991, with a final
maturity date in 2013, began being amortized in 1994, while the notional amount
($250 million) of the swap entered into in 1993, with a final maturity date in
2023, will begin to amortize in 1996. The expiration dates of these swaps are
the earlier of (i) the notional amounts being reduced to zero or (ii) the final
maturity dates.
The fixed to floating swaps are subject to a bilateral security agreement
allowing one party to the agreement to require the second party to the agreement
to establish a cash collateral account equal to the fair value of the swap
adjusted by a threshold amount. Collateral amounts deposited by the Company
totaled $31 million at December 31, 1994.
The Company uses Eurodollar futures contracts to hedge its floating
interest rate exposure on portions of the above swaps. At December 31, 1994 and
1993, the Company was party to Eurodollar futures contracts with notional
amounts aggregating $250 million extending through June 1996. At December 31,
1993, the Company had additional Eurodollar futures contracts outstanding with
notional amounts aggregating $250 million through September 1994. Deferred
gains/(losses) were $8 million and ($5) million at December 31, 1994 and 1993,
respectively. Deferred gains or losses are amortized as adjustments to interest
expense over the three-month contract period which begins at the final
settlement date of each contract.
The Company uses LIBOR caps to reduce the potential impact of increases in
interest rates on commercial paper. LIBOR caps effectively limit the Company's
interest costs on specified amounts of commercial paper to a maximum rate.
Premiums paid for LIBOR caps are amortized to interest
37
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expense over the terms of the LIBOR caps. During 1994 and 1993, the Company had
LIBOR caps outstanding with notional amounts ranging from $50 million to $600
million. At December 31, 1994 and 1993, the Company had $50 million and $300
million, respectively, of LIBOR caps outstanding. No amounts were received
during 1994 or 1993 under LIBOR cap agreements.
Currency Risk Management: The Company uses currency forwards and options
to hedge intercompany interest payments from the Netherlands. At December 31,
1994 and 1993, the Company had currency forwards and options, all having
maturities of less than one year, to exchange Dutch florins for U.S. dollars in
the amount of $1 million and $4 million, respectively. During 1994 and 1993,
currency forwards and options to exchange Dutch florins for U.S. dollars in the
amount of $15 million and $4 million, respectively, settled or expired resulting
in realized losses of less than $1 million each year. Amounts deferred at
December 31, 1994 and 1993, for currency forwards and options were not
significant.
Credit Risk: The Company is exposed to credit losses in the event of
nonperformance by counterparties on interest rate swaps and other risk
management instruments. The Company does not believe that there currently is a
significant risk of nonperformance by any of the parties to the interest rate
swaps and other risk management instruments. Amounts due to the Company under
these agreements were not significant at December 31, 1994.
NOTE 6. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial instruments
at December 31 were as follows (in millions; (liability)/asset):
<TABLE>
<CAPTION>
1994 1993
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Cash and cash equivalents...................... $ 22 $ 22 $ 11 $ 11
Long-term debt................................. (4,187) (4,060) (4,391) (4,783)
Warrants....................................... -- (8) -- (58)
Futures contracts.............................. -- 8 -- (5)
Interest rate swaps............................ -- (49) -- (5)
</TABLE>
The following methods and assumptions were used by the Company in
estimating fair values for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheets for cash and cash equivalents approximates fair value.
Long-term debt and warrants: The carrying amounts of commercial
paper, variable rate debt and other short-term borrowings approximate their
fair values. The fair values of the Company's long-term debt, representing
the amount at which the debt could be exchanged on the open market, are
determined based on the Company's current incremental borrowing rate for
similar types of borrowing arrangements. The Company does not anticipate
any significant refinancing activities which would settle long-term debt at
fair value. The fair values of the Company's warrants are estimated based
on valuations from major investment banks.
Derivatives: The fair values of the Company's futures contracts are
estimated based on current settlement values. The fair values of the
Company's interest rate swaps are estimated based on valuations from major
investment banks.
38
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. PREFERRED STOCK
In connection with the 1993 acquisition of the Coca-Cola Bottling Company
of Northeast Arkansas, Inc., the Company issued 1,000,000 shares of nonvoting
convertible preferred stock with a stated value of $35 per share. Each share is
convertible into one share of common stock at any time at the option of the
holder. The preferred stock may be called by the Company at any time for cash
equal to its stated value plus accrued dividends. The preferred stock pays
cumulative cash dividends of 3% per annum for the first five years, 4.29% per
annum for the following five years, adjusting to an annual rate equal to LIBOR
plus 1% thereafter. Adjustment of the stated value of the preferred stock to its
estimated fair value at date of issuance of approximately $29 million, results
in an annual dividend cost of approximately 6%.
NOTE 8. SHARE REPURCHASES
In August 1994, the Company began a share repurchase program under which
the Company may repurchase up to ten million shares of its outstanding common
stock. The amount of shares repurchased and the length of time required to
repurchase such shares will depend on the Company's level of capital
expenditures, acquisition opportunities, other alternative uses of cash, and
market conditions. As of December 31, 1994, the Company had repurchased
1,558,000 shares of common stock under the program for an aggregate cost of
approximately $28 million. In a separate program during 1993, the Company
repurchased 1,153,900 shares of its common stock for an aggregate cost of
approximately $17 million.
Repurchased shares are added to treasury stock and are available for
general corporate purposes including the funding of various employee benefits
and compensation plans. On October 18, 1994, the Company's Board of Directors
approved the establishment of a flexible employee grantor trust to fund future
stock-related compensation and benefit obligations including, but not limited
to, a savings investment plan, restricted stock awards and stock option
exercises. As of December 31, 1994, there were no transactions related to the
trust.
NOTE 9. STOCK OPTIONS AND OTHER STOCK PLANS
The Company's 1994 Stock Option Plan (the "1994 Plan") provides for the
granting of nonqualified stock options to certain officers and key employees of
the Company to purchase up to two million shares of the Company's common stock.
The Company's 1991 Stock Option Plan (the "1991 Plan") provides for the granting
of nonqualified stock options to officers and certain key employees to purchase
up to three million shares of the Company's common stock, prior to the plan's
expiration in 1996. The Company's 1990 Management Stock Option Plan (the
"Management Option Plan") provides for the granting of nonqualified stock
options to purchase up to two million shares of the Company's common stock.
Generally, options awarded under the 1994 Plan, the 1991 Plan and the Management
Option Plan (i) are granted at prices which equate to or are above fair market
value on the date of grant; (ii) vest ratably over either a three or four year
period; and (iii) expire ten years subsequent to award. For certain senior
executives receiving awards under the 1994 Plan, the options are
performance-vested and become exercisable solely upon attainment of certain
increases in the market price of the Company's common stock within five years
from the date of grant.
39
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition to the plans noted above, included in options outstanding at
December 31, 1994 and 1993, are various options granted under previous plans
with similar terms. A summary of stock option activity follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Options outstanding at beginning of year.................... 6,041,767 5,680,333
Options granted............................................. 1,606,900 1,109,900
Options exercised........................................... (916,799) (149,921)
Options canceled............................................ (399,301) (598,545)
--------- ---------
Options outstanding at end of year.......................... 6,332,567 6,041,767
========= =========
Options exercisable at end of year (Option price -- $13.125
to $21.225 per share)..................................... 2,922,806 3,034,534
========= =========
Shares available for future grant........................... 679,600 286,500
========= =========
</TABLE>
On initial offering of stock to the public, each of the seven directors who
was not an officer of the Company or The Coca-Cola Company was awarded options
to acquire up to 1,500 shares of common stock, and certain officers of the
Company were granted options to purchase 245,000 shares of the Company's common
stock at $16.50 per share (the initial public offering price). Since that time,
new directors, upon election, who were not officers of the Company or The
Coca-Cola Company were awarded options to acquire up to 1,500 shares of common
stock at $16.50 per share. Options to purchase 198,000 shares under this plan
have subsequently been canceled, and 50,000 options have been exercised (35,000
during 1994). The remaining 10,500 exercisable options outstanding expire in
November 1996 if not exercised.
The Company's 1992 Restricted Stock Award Plan ("the 1992 Plan") provides
for awards to certain officers and other key employees of the Company of up to
an aggregate 1.5 million shares of the Company's common stock. Awards under the
1992 Plan vest (i) when a participant dies, retires or becomes disabled; (ii)
when the Compensation Committee of the Board of Directors elects, in its sole
discretion, to remove certain restrictions; or (iii) based on the attainment of
certain market price levels of the Company's stock.
The Company's 1992 Restricted Stock Award Plan was amended and restated in
February 1994 (the "Amended 1992 Plan"), with respect to grants after that date.
The Amended 1992 Plan provides for the award of up to 725,000 shares of the
Company's common stock to certain officers and other key employees of the
Company. Awards under the Amended 1992 Plan vest only upon attainment of certain
increases in the market price of the Company's common stock within five years
from the date of grant, at which time the ownership restrictions on the shares
are removed.
All restricted stock awards entitle the participant to full dividend and
voting rights. Shares are restricted as to disposition and subject to forfeiture
under certain circumstances. Upon issuance of restricted shares, unearned
compensation, equal to the market value of the shares at the date of grant, is
charged to share-owners' equity and amortized to expense ratably over the
vesting or performance periods, as applicable. An aggregate 74,000 and 22,400
outstanding restricted shares
40
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
were forfeited during 1994 and 1993, respectively, and returned to treasury. A
summary of award activity follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Awards available for grant-beginning of year................... 185,800 648,900
New awards authorized.......................................... 725,000 --
Available awards terminated.................................... (185,800) --
Restricted shares awarded...................................... (685,000) (463,100)
-------- --------
Awards available for grant-end of year......................... 40,000 185,800
======== ========
</TABLE>
The Company's Stock Appreciation Rights Plan provides for the award of an
aggregate one million stock appreciation rights ("units") to qualified
participants prior to the plan's expiration in 1996. In 1992, units available
for future grants under all stock appreciation rights plans were terminated.
Each unit entitles the holder to receive cash based on the difference between
the market value of a share of the Company's common stock on the date of award
and the fair market value of such stock on the date of exercise. Included in
stock appreciation rights outstanding at December 31, 1994 and 1993, are various
units awarded under a prior plan with similar terms. A summary of stock
appreciation rights activity follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Units outstanding at beginning of year........................ 878,377 1,070,572
Units exercised............................................... (405,293) (58,027)
Units canceled................................................ (37,250) (134,168)
-------- ---------
Units outstanding at end of year (base value -- $14.50 to
$17.50 per unit)............................................ 435,834 878,377
======== =========
</TABLE>
NOTE 10. PENSION AND CERTAIN BENEFIT PLANS
The Company sponsors various qualified and nonqualified defined benefit
pension plans, and participates in certain multiemployer pension plans, covering
substantially all U.S. employees. The benefits related to Company-sponsored
plans are based on years of service and employee compensation. The Company's
policy is to fund at least the minimum contribution required by applicable
regulations. Company-sponsored qualified benefit plans are insured by the
Pension Benefit Guaranty Corporation ("PBGC").
In addition to U.S. plans, the Company sponsors a supplemental defined
benefit plan and an unfunded voluntary early retirement plan for certain
international employees, and participates in a multiemployer pension plan
covering a majority of its international employees.
Total pension expense for multiemployer plans was $7 million in 1994, and
$6 million in 1993 and 1992. The components of net pension expense for
Company-sponsored plans are as follows (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost.................................................... $ 22 $ 20 $ 14
Interest cost on projected benefit obligation................... 32 30 29
Actual return on assets......................................... (11) (62) (36)
Net amortization and deferral................................... (26) 26 6
---- ---- ----
Net pension expense............................................. $ 17 $ 14 $ 13
==== ==== ====
</TABLE>
41
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the funded status of Company-sponsored plans
to amounts recognized in the consolidated balance sheets at December 31,
segregated by (i) plans whose assets exceed the accumulated benefit obligation
("ABO") and (ii) plans whose ABO exceeds assets (in millions):
<TABLE>
<CAPTION>
PBGC INSURED PLANS OTHER PLANS
------------------------------------- -----------------
1994 1993 1994 1993
----------------- ----------------- ------- -------
ASSETS ABO ASSETS ABO ABO ABO
EXCEED EXCEEDS EXCEED EXCEEDS EXCEEDS EXCEEDS
ABO ASSETS ABO ASSETS ASSETS ASSETS
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation.......... $(279) $ (32) $(303) $ (22) $ (23) $ (24)
======= ======= ======= ======= ======= =======
Accumulated benefit obligation..... $(297) $ (39) $(325) $ (25) $ (30) $ (29)
======= ======= ======= ======= ======= =======
Projected benefit obligation......... $(340) $ (40) $(367) $ (25) $ (41) $ (39)
Plan assets at fair value, primarily
listed stocks, bonds and government
securities......................... 377 28 402 18 19 17
------- ------- ------- ------- ------- -------
Plan assets in excess of (less than)
projected benefit obligation....... 37 (12) 35 (7) (22) (22)
Unrecognized net (gain) loss......... (29) 6 (14) 3 (1) 2
Unrecognized prior service cost...... (11) 4 (12) 2 (8) (9)
Unrecognized net transition (asset)
liability and other................ (11) 1 (12) -- 2 2
------- ------- ------- ------- ------- -------
Pension liability included in the
consolidated balance sheets........ $ (14) $ (1) $ (3) $ (2) $ (29) $ (27)
======= ======= ======= ======= ======= =======
</TABLE>
Significant actuarial assumptions used in developing the projected benefit
obligation at December 31 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic Plans:
Discount rate............................................... 8.25% 7.5% 8.25%
Expected return on plan assets.............................. 8.5% 8.5% 9.5%
Rate of increase in future compensation..................... 5% 5.5% 6%
International Plans:
Discount rate............................................... 7.5% 7.5%
Expected return on plan assets.............................. 7.5% 7.5%
Rate of increase in future compensation..................... 3.5% 3.5%
</TABLE>
The Company also sponsors a qualified defined contribution plan covering
all full-time nonunion employees in the U.S. The Company matches 50% of a
participant's voluntary contributions up to a maximum of 6% of a participant's
compensation. The Company's contribution expense was $11 million in 1994 and $10
million in 1993 and 1992.
42
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. POSTRETIREMENT BENEFIT PLANS
The Company sponsors various unfunded defined benefit postretirement plans
that provide healthcare and life insurance benefits to substantially all
nonunion and certain union U.S. retirees who retire with a minimum period of
service.
Effective January 1, 1993, the Company amended its postretirement benefit
plans resulting in a reduction in the accumulated benefit obligation, and
generation of related excess prior service cost, of $148 million in 1993.
Full-year 1993 postretirement benefits expense was reduced by approximately $31
million as a result of the plan amendments. The excess prior service cost is
being amortized over the average service life of plan participants
(approximately 17 years).
Net postretirement benefits expense includes the following components (in
millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost attributed to service during the year.............. $ 4 $ 6 $14
Interest cost on accumulated postretirement benefit
obligation.................................................... 13 14 24
Net amortization and deferral................................... (9) (9) -
--- --- ---
Net postretirement benefits expense............................. $ 8 $11 $38
=== === ===
</TABLE>
Amounts recognized in the consolidated balance sheets at December 31
consist of unfunded obligations relating to the following (in millions):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................. $116 $105
Fully eligible active plan participants.............................. 9 11
Other active plan participants....................................... 54 63
---- ----
179 179
Unamortized excess prior service cost asset............................ 131 140
Unrecognized net gain (loss)........................................... 5 (2)
---- ----
Accrued postretirement benefit obligation.............................. $315 $317
==== ====
</TABLE>
Actuarial assumptions used in determining postretirement benefit cost and
the accumulated postretirement benefit obligation include a discount rate of
8.25% and 7.5% in 1994 and 1993, respectively. The assumed weighted average
annual rate of increase in the per capita cost of covered benefits (the health
care cost trend rate) was 11.7% pre-Medicare and 9.3% post-Medicare for 1994,
and 15% pre-Medicare and 11% post-Medicare for 1993. The postretirement benefit
plan, as amended effective January 1, 1993, is a defined dollar benefit plan
which limits the effect of medical inflation to a maximum of 4% per year after
1995. Because the amended postretirement medical plan has established dollar
limits for determining company contributions, the effect of a 1% increase in the
assumed healthcare cost trend rate is not significant.
Effective January 1, 1992, the Company adopted FAS 106 which changed the
method of accounting for postretirement benefits from expensing claims as
incurred to accruing the costs of such benefits during the periods employees
provide service to the Company. The effect on years prior to 1992 of adopting
FAS 106, representing that portion of unrecognized future retiree benefit costs
related to past service of both active and retired employees as of the date of
adoption, was reported as the cumulative effect of an accounting change in 1992
and prior periods were not restated. The cumulative effect of adopting FAS 106
increased the 1992 net loss by approximately $148 million (net of income taxes
of $91 million) or $1.15 per common share.
43
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. INCOME TAXES
The current income tax provision represents the amount of income taxes paid
or payable for the year. The deferred income tax provision represents the change
in deferred tax liabilities and assets and, for business combinations, the
change in such tax liabilities and assets since the date of acquisition.
Significant components of the provision for income taxes, excluding the
cumulative effect of accounting changes in 1992, are as follows (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
United States
Federal.................................................... $ 4 $ - $ 6
State and local............................................ 6 9 18
International................................................. 2 1 -
--- --- ----
Total current provision............................... 12 10 24
--- --- ----
Deferred:
United States
Federal.................................................... 38 20 (9)
State and local............................................ 9 2 (12)
Rate change -- federal..................................... - 40 -
International................................................. (1) (2) -
--- --- ----
Total deferred provision.............................. 46 60 (21)
--- --- ----
Total provision for income taxes...................... $58 $70 $ 3
=== === ====
</TABLE>
The Omnibus Budget Reconciliation Act was signed into law in August 1993.
The Company was principally affected by an increase in the corporate marginal
income tax rate from 34% to 35%. The Company's deferred income taxes were
adjusted during the third quarter of 1993 to reflect the effect of the new rate,
resulting in a one-time charge of approximately $40 million ($0.31 per common
share). Additionally, the Company's annual estimated effective tax rate was
increased by an amount approximating the 1% marginal rate increase. A
reconciliation of the expected income tax expense (benefit) at the statutory
federal rate to the Company's actual income tax provision is as follows (in
millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory expense (benefit)..................................... $45 $19 $ (4)
State expense -- net of federal................................. 10 7 4
State net operating loss benefits -- net of federal............. (7) (8) (8)
State benefits valuation allowance provision.................... 7 8 8
Nondeductible items............................................. 2 2 1
Rate change -- federal.......................................... - 40 -
Other, net...................................................... 1 2 2
--- --- ----
$58 $70 $ 3
=== === ====
</TABLE>
Deferred income taxes are recognized for tax consequences of temporary
differences between the financial reporting and the tax bases of existing assets
and liabilities, by applying enacted
44
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
statutory tax rates applicable to future years to such differences. Significant
components of the Company's deferred tax liabilities and assets as of December
31 are as follows (in millions):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Deferred tax liabilities:
Franchise assets............................................. $2,241 $2,210
Property, plant and equipment................................ 184 180
------ ------
Total deferred tax liabilities....................... 2,425 2,390
------ ------
Deferred tax assets:
Net operating loss carryforwards............................. (353) (378)
Employee and retiree benefit accruals........................ (203) (186)
Other, net................................................... (97) (100)
------ ------
Total deferred tax assets............................ (653) (664)
Valuation allowance for deferred tax assets.................... 112 105
------ ------
Net deferred tax liabilities......................... $1,884 $1,831
====== ======
</TABLE>
Deferred tax assets are recognized for the tax benefit of deductible
temporary differences and federal and state net operating loss and tax credit
carryforwards. Valuation allowances are recognized if it is more likely than not
that some or all of the deferred tax assets will not be realized. Management
believes that it is more likely than not that the majority of deferred tax
assets will be realized through future taxable income resulting from the
reversal of existing taxable temporary differences and depletion of certain
significant tax deductions. Valuation allowances of $112 million and $105
million as of December 31, 1994 and 1993, respectively, were established for the
remaining deferred tax assets. In the event the Company realizes tax benefits
for net operating loss carryforwards of acquired companies for which a valuation
allowance has been established, such benefits would reduce recorded franchise
values. Included in the valuation allowance as of December 31, 1994 and 1993,
was $62 million for net operating loss carryforwards of acquired companies.
Tax operating loss carryforwards, aggregating $840 million, have arisen
principally from the additional tax deductions resulting from elections filed
under Section 338 of the Internal Revenue Code relating to various bottling
companies acquired in 1986. These carryforwards are available to offset future
federal taxable income through their expiration in varying amounts aggregating
$7 million in 1996 through 1998; $161 million in 1999 through 2003; and $672
million in 2004 through 2008.
Effective January 1, 1992, the Company adopted FAS 109, changing its method
of accounting for income taxes by requiring that deferred tax liabilities and
assets be established based on the difference between financial statement and
income tax bases of assets and liabilities, using existing tax rates. The effect
on years prior to 1992 of adopting FAS 109, representing previously unrecognized
net tax liabilities, was reported as the cumulative effect of an accounting
change in 1992 and prior periods were not restated. The cumulative effect of
adopting FAS 109 increased the 1992 net loss by approximately $23 million ($0.18
per common share).
NOTE 13. RELATED PARTY TRANSACTIONS
The Company and The Coca-Cola Company have entered into various
transactions and agreements related to their respective businesses. The
Coca-Cola Company owns approximately 44% of the Company's outstanding common
shares and the Company generates approximately 90% of its product sales volume
from the sale of the products of The Coca-Cola Company. Various
45
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
significant transactions and agreements entered into between the Company and The
Coca-Cola Company are disclosed in other sections of the accompanying financial
statements and related notes. The following items represent other significant
transactions between the Company and The Coca-Cola Company, and its affiliates:
Fountain Syrup and Package Product Sales: Certain of the Company's
operations sell fountain syrup to The Coca-Cola Company and deliver this syrup
on behalf of The Coca-Cola Company to certain major or national accounts of The
Coca-Cola Company. In addition, the Company sells bottle/can products to The
Coca-Cola Company at prices that equate to amounts charged by the Company to its
major customers. During 1994, 1993 and 1992, The Coca-Cola Company paid the
Company approximately $235 million, $220 million and $193 million, respectively,
for fountain syrups, bottle/can products and delivery and billing services.
Marketing Support Arrangements: The Coca-Cola Company engages in a variety
of marketing programs, local media advertising and other similar arrangements to
promote the sale of products of The Coca-Cola Company in territories operated by
the Company. For 1994, 1993 and 1992, total direct marketing support paid or
payable to the Company or on behalf of the Company by The Coca-Cola Company
approximated $319 million, $256 million and $253 million, respectively. In
addition, The Coca-Cola Company committed to provide approximately $34 million
in 1994 to assist in the construction of an infrastructure to support an
increased rate of cold drink equipment placement. Pursuant to a cooperative
advertising and trade arrangement with The Coca-Cola Company, the Company paid
The Coca-Cola Company an additional $71 million, $65 million and $63 million in
1994, 1993 and 1992, respectively, for local media and marketing program
expense.
NOTE 14. ENVIRONMENTAL MATTERS
The Company is responsible 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
which go into effect in varying stages through 1998. The Company estimates
completion of its tank removal and replacement program in 1995, with related
soil and groundwater remediation continuing through 2002. Ongoing environmental
compliance costs, including routine maintenance, monitoring and similar costs,
are not significant. The Company also incurs costs in connection with other
environmental programs covering the discharge of materials and waste water
treatment. Expenditures aggregating $12 million, $9 million and $8 million were
made in 1994, 1993, and 1992 in connection with the Company's environmental
programs. The Company believes that any amount it may be required to pay in
excess of amounts recorded above 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 federal or state "Superfund" sites.
At January 30, 1995, there were six federal sites where the Company's
involvement or liability as a PRP was unresolved. In addition, there were eight
other federal and five state sites at which it had been concluded that the
Company had no responsibility, ultimate liability amounts would be less than
$100,000 or payments made to date by the Company would be sufficient to satisfy
all liability of the Company. 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 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 financially
solvent PRPs. As a result, the Company believes that any ultimate liability will
not have a material effect on its financial position or results of operations.
46
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. COMMITMENTS AND CONTINGENCIES
The Company has guaranteed payment of up to $194 million of indebtedness
owed by a manufacturer supplying certain packaging used in the Company's
manufacturing process; at December 31, 1994, this manufacturer had approximately
$82 million of indebtedness outstanding guaranteed by the Company. The Company
entered into a similar guarantee of up to $45 million for a second manufacturer
in January 1995. In addition, the Company has provided letters of credit
aggregating approximately $89 million primarily in connection with
self-insurance programs.
The Company has entered into long-term purchase agreements with various
suppliers. Subject to the supplier's quality and performance, the purchases
covered by these agreements aggregate approximately $755 million in 1995, $774
million in 1996, $749 million in 1997, $721 million in 1998 and $670 million in
1999.
The Company leases office and warehouse space, computer hardware, and
machinery and equipment under lease agreements which expire at various dates
through 2019. At December 31, 1994, future minimum lease payments under
noncancellable operating leases aggregate approximately $40 million. Rent
expense was approximately $28 million, $25 million and $25 million during 1994,
1993 and 1992, respectively.
The Company is involved in various claims and legal proceedings which have
arisen in the ordinary course of its business. In addition, a complaint was
filed in December 1991 against the Company, each of the directors of the Company
and Johnston Coca-Cola Bottling Group, Inc. ("Johnston") seeking, among other
things, to disallow the Johnston 1991 acquisition. The complaint alleges that
The Coca-Cola Company, as the holder of approximately 49% (prior to the Johnston
acquisition) of the outstanding common stock of the Company, breached its
fiduciary duties by exerting influence over the Company in connection with the
acquisition in order to maximize its financial interests at the expense of the
Company and the Company's public share owners. The complaint also alleges that
the directors of the Company breached their fiduciary duties to the Company and
its public share owners. Management believes that the complaint is without
merit. While the ultimate outcome of the lawsuits, claims and legal proceedings
described above cannot be determined, management believes these matters will not
have a material adverse effect on the financial position, cash flows or results
of operations of the Company.
NOTE 16. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments during the year were as follows (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest (net of capitalized amount)........................ $328 $330 $255
Income taxes................................................ 3 10 36
</TABLE>
Changes in current assets and liabilities pertaining to operating
activities were as follows (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- -----
<S> <C> <C> <C>
Trade accounts and other receivables....................... $(12) $ 1 $ (30)
Inventories................................................ (35) 28 (16)
Prepaid expenses and other assets.......................... (9) 6 (13)
Accounts payable and accrued expenses...................... 114 (13) (57)
---- ---- -----
Increase (decrease) cash from operations................... $ 58 $ 22 $(116)
==== ==== =====
</TABLE>
47
<PAGE>
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In conjunction with the acquisitions of bottling companies, liabilities
were assumed as follows (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
---- ----- ----
<S> <C> <C> <C>
Fair value of assets acquired.............................. $ 16 $ 774 $ 48
Cash paid.................................................. (12) (287) (27)
Equity issued.............................................. - (34) -
Debt issued................................................ - (1) (15)
---- ----- ----
Liabilities assumed........................................ $ 4 $ 452 $ 6
==== ===== ====
</TABLE>
NOTE 17. QUARTERLY FINANCIAL DATA
Unaudited quarterly financial data follows (in millions except per share
data):
<TABLE>
<CAPTION>
FISCAL
FIRST SECOND THIRD FOURTH(B) YEAR
------ ------ ------ --------- ------
<S> <C> <C> <C> <C> <C>
1994
Net Operating Revenues................... $1,320 $1,610 $1,595 $ 1,486 $6,011
Gross Profit............................. 521 623 601 563 2,308
Net Income (Loss) Applicable to Common
Share Owners........................... (7) 38 25 11 67
Net Income (Loss)
Per Common Share(a).................... (0.06) 0.29 0.19 0.09 0.52
</TABLE>
<TABLE>
<CAPTION>
FISCAL
FIRST(B) SECOND THIRD(C) FOURTH(D) YEAR
------ ------ -------- --------- ------
<S> <C> <C> <C> <C> <C>
1993
Net Operating Revenues................... $1,208 $1,448 $1,487 $ 1,322 $5,465
Gross Profit............................. 477 556 541 519 2,093
Net Income (Loss) Applicable to Common
Share Owners........................... (5) 16 (30) 4 (15)
Net Income (Loss)
Per Common Share(a).................... (0.04) 0.13 (0.23) 0.03 (0.11)
</TABLE>
- ---------------
(a) Due to the method used in calculating per share data as prescribed by
Accounting Principles Board Opinion No. 15 and the timing of share
repurchases by the Company, the per share data does not sum in certain
instances to the per share data as computed for the quarter and the year.
(b) Each quarter presented includes ninety-one days, except the first quarter
of 1993 and the fourth quarter of 1994, which include ninety-two days.
(c) The third quarter of 1993 included a one-time charge of approximately $40
million ($0.31 per common share) to increase the Company's deferred tax
liability as a result of a 1% increase in the corporate marginal income tax
rate.
(d) The fourth quarter of 1993 included a favorable year-end inventory (LIFO)
adjustment of approximately $7 million of which approximately $5 million
($0.03 per common share) applied to previous quarters.
48
<PAGE>
COCA-COLA ENTERPRISES INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Coca-Cola Enterprises Inc.
We have audited the accompanying consolidated balance sheets of
Coca-Cola Enterprises Inc. and the related consolidated statements of
operations, share-owners' equity, and cash flows for each of the three years
in the period ended December 31, 1994. Our audits also included the financial
statement schedule listed in the Index at Item 14(a)(2). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coca-Cola Enterprises Inc. at December 31, 1994 and 1993, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in the notes to consolidated financial statements, in 1992 the
Company changed its methods of accounting for income taxes and postretirement
benefits other than pensions.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
January 30, 1995
49
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) Financial Statements. The following consolidated financial statements
of the Company and subsidiaries, are included in Item 8 of this report:
Consolidated Statements of Operations -- Years ended December 31, 1994,
1993 and 1992
Consolidated Statements of Cash Flows -- Years ended December 31, 1994,
1993 and 1992
Consolidated Balance Sheets -- December 31, 1994 and 1993.
50
<PAGE>
Consolidated Statements of Share-Owners' Equity -- Years ended December 31,
1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
(2) Financial Statement Schedules. The following financial statement
schedule of the Company and its subsidiaries is included in this report on the
page indicated:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts for the fiscal years ended
December 31, 1994, 1993 and 1992............................... F-2
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted either because they are not required under the related instructions or
because they are inapplicable.
(3) Exhibits.
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED
HEREWITH (THE COMPANY'S CURRENT, QUARTERLY, AND
ANNUAL REPORTS ARE FILED WITH THE SECURITIES
EXHIBIT AND EXCHANGE COMMISSION UNDER FILE
NUMBER DESCRIPTION NO. 01-09300)
- ------ ---------------------------------------- ----------------------------------------------------
<C> <C> <S> <C>
3.1 -- Restated Certificate of Incorporation of Exhibit 28.2 to the Company's Quarterly
Coca-Cola Enterprises, as amended on Report on Form 10-Q as filed May 11,
April 15, 1992. 1992.
3.2 -- Bylaws of Coca-Cola Enterprises, as Exhibit 3.2 to the Company's Annual
amended through February 18, 1992. Report on Form 10-K for the fiscal year
ended December 31, 1991.
4.1 -- Indenture dated as of July 30, 1991, Exhibit 4.1 to the Company's Current
together with the First Supplemental Report on Form 8-K (Date of Report: July
Indenture thereto dated January 29, 30, 1991); Exhibit 4.01 to the Company's
1992, between Coca-Cola Enterprises and Current Report on Form 8-K (Date of
Manufacturers Hanover Trust Company, as Report: January 29, 1992); Exhibit 4.02
Trustee, with regard to certain to the Company's Current Report on Form
unsecured and unfunded debt securities 8-K (Date of Report: January 29, 1992);
of Coca-Cola Enterprises, and forms of Exhibit 4.01 to the Company's Current
notes and debentures issued thereunder. Report on Form 8-K (Date of Report:
September 8, 1992); Exhibits 4.01 and
4.02 to the Company's Current Report on
Form 8-K (Date of Report: November 12,
1992); Exhibit 4.01 to the Company's
Current Report on Form 8-K (Date of
Report: January 4, 1993); Exhibit 4.02
to the Company's Current Report on Form
8-K (Date of Report: September 15,
1993).
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR
FILED HEREWITH (THE COMPANY'S CURRENT, QUARTERLY,
EXHIBIT AND ANNUAL REPORTS ARE FILED WITH THE SECURITIES
NUMBER DESCRIPTION AND EXCHANGE COMMISSION UNDER FILE NO. 01-09300)
- ------ ---------------------------------------- ------------------------------------------------
<C> <C> <S> <C>
4.2 -- Medium-Term Notes Issuing and Paying Exhibit 4.2 to the Company's Annual Report on
Agency Agreement dated as of October 24, Form 10-K for the fiscal year ended December
1994, between Coca-Cola Enterprises and 31, 1994.
Chemical Bank, as issuing and paying
agent, including as Exhibit B thereto
the form of Medium-Term Note issuable
thereunder.
4.3 -- Indenture dated as of November 15, 1989 Exhibit 4.01 to the Company's Current
between Coca-Cola Enterprises and Report on Form 8-K (Date of Report:
Bankers Trust Company, as Trustee, with December 12, 1989); Exhibit 4.4(a) to
regard to certain unsecured and the Company's Annual Report on Form 10-K
unsubordinated debt securities of for the fiscal year ended December 29,
Coca-Cola Enterprises, and forms of 1989; Exhibit 4.4(b) to the Company's
Fixed Rate Medium Term Note and Floating Annual Report on Form 10-K for the
Rate Medium Term Note, each issuable fiscal year ended December 29, 1989.
commencing December 18, 1989 pursuant to
the above-referenced Indenture.
4.4 -- Credit Agreement dated as of December 7, Exhibit 4.4 to the Company's Annual
1994 among Coca-Cola Enterprises; Bank Report on Form 10-K for the fiscal
of America National Trust and Savings year ended December 31, 1994.
Association; Citibank, N.A.; The First
National Bank of Chicago; NationsBank of
Texas, National Association; Union Bank
of Switzerland, New York Branch; Texas
Commerce Bank National Association;
Trust Company Bank; Wachovia Bank of
Georgia, N.A.; Canadian Imperial Bank of
Commerce; Toronto Dominion (Texas),
Inc.; Swiss Bank Corporation, New York
Branch and Cayman Islands Branch; Mellon
Bank, N.A.; The Northern Trust Company;
ABN AMRO Bank, N.V., Atlanta Agency.
Certain instruments which define the rights of holders of long-term debt of the
Company and its subsidiaries are not being filed because the total amount of
securities authorized under each such instrument does not exceed 10% of the total
consolidated assets of the Company and its subsidiaries. The Company and its
subsidiaries hereby agree to furnish a copy of each such instrument to the
Commission upon request.
10.1 -- 1986 Stock Option Plan of Coca-Cola Exhibit 10.1 to the Company's Annual
Enterprises, as amended through February Report on Form 10-K for the fiscal year
12, 1991.* ended December 31, 1991.
10.2 -- Form of Stock Option Agreement between Exhibit 10.5 to the Company's
Coca-Cola Enterprises and certain of its Registration Statement on Form S-1, No.
officers.* 33-9447.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND
EXHIBIT ANNUAL REPORTS ARE FILED WITH THE SECURITIES
NUMBER DESCRIPTION AND EXCHANGE COMMISSION UNDER FILE NO. 01-09300)
- ------ ---------------------------------------- ------------------------------------------------
<C> <C> <S> <C>
10.3 -- Coca-Cola Enterprises 1991 Stock Option Exhibit 10.11 to the Company's Annual
Plan, as amended and restated through Report on Form 10-K for the fiscal year
February 18, 1992.* ended December 31, 1992.
10.4 -- Coca-Cola Enterprises 1994 Stock Option Exhibit 4.3 to the Company's
Plan.* Registration Statement on Form S-8, No.
33-53221.
10.5 -- Coca-Cola Enterprises 1992 Restricted Exhibit 4.3 to the Company's
Stock Award Plan (as amended and Registration Statement on Form S-8, No.
restated effective February 7, 1994).* 33-53219.
10.6 -- 1992 and 1993 Long-Term Incentive Plan Exhibit 10.6 to the Company's Annual Report on
of Coca-Cola Enterprises, as amended.* Form 10-K for the fiscal year ended December
31, 1994.
10.7 -- Coca-Cola Enterprises 1994-1996 Long- Exhibit 10.7 to the Company's Annual Report on
Term Incentive Plan.* Form 10-K for the fiscal year ended December
31, 1994.
10.8 -- Coca-Cola Enterprises 1994 Executive Exhibit 10.8 to the Company's Annual Report on
Management Incentive Plan (Effective Form 10-K for the fiscal year ended December
January 1, 1994).* 31, 1994.
10.9 -- 1991 Amendment and Restatement of the Exhibit 10.9 to the Company's Annual Report on
Coca-Cola Enterprises Supplemental Form 10-K for the fiscal year ended December
Retirement Plan, as amended effective 31, 1994.
July 1, 1993.*
10.10 -- Form of Stock Option Agreements between Exhibit 10.36 to the Company's
Coca-Cola Enterprises and certain of its Registration Statement on Form S-1, No.
directors.* 33-9447.
10.11 -- Coca-Cola Enterprises 1988 Stock Exhibit 10.10 to the Company's Annual
Appreciation Rights Plan, as amended Report on Form 10-K for the fiscal year
through February 12, 1991.* ended December 31, 1991.
10.12 -- Coca-Cola Enterprises Officer Severance Exhibit 10.12 to the Company's Annual
Plan.* Report on Form 10-K for the fiscal year
ended December 31, 1991.
10.13 -- Amended and Restated Deferred Exhibit 10.16 to the Company's Annual
Compensation Agreement between Johnston Report on Form 10-K for the fiscal year
Coca-Cola Bottling Group and Henry A. ended December 31, 1993.
Schimberg dated December 16, 1991, as
amended.*
10.14 -- 1993 Amendment and Restatement of Exhibit 10.17 to the Company's Annual
Deferred Compensation Agreement between Report on Form 10-K for the fiscal year
Johnston Coca-Cola Bottling Group and ended December 31, 1993.
John R. Alm as of April 30, 1993.*
10.15 -- Retirement Plan for the Board of Exhibit 10.33 to the Company's Annual
Directors of Coca-Cola Enterprises, Report on Form 10-K for the fiscal year
effective April 11, 1991.* ended December 31, 1991.
10.16 -- Deferred Compensation Plan for Non- Exhibit 10.16 to the Company's Annual
Employee Director Compensation, as Report on Form 10-K for the fiscal year
amended and restated effective April 1, ended December 31, 1994.
1994.*
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
OR FILED HEREWITH (THE COMPANY'S CURRENT,
QUARTERLY, AND ANNUAL REPORTS ARE FILED
EXHIBIT WITH THE SECURITIES AND EXCHANGE
NUMBER DESCRIPTION UNDER FILE NO. 01-09300)
- ------ ---------------------------------------- --------------------------------------------
<C> <C> <S> <C>
10.17 -- Tax Sharing Agreement dated November 12, Exhibit 10.1 to the Company's
1986 between Coca-Cola Enterprises and Registration Statement on Form S-1, No.
The Coca-Cola Company. 33-9447.
10.18 -- Registration Rights Agreement dated Exhibit 10.3 to the Company's
November 12, 1986 between Coca-Cola Registration Statement of Form S-1, No.
Enterprises and The Coca-Cola Company. 33-9447.
10.19 -- Registration Rights Agreement dated as Exhibit 10 to the Company's Current
of December 17, 1991 among Coca-Cola Report on Form 8-K (Date of Report:
Enterprises, The Coca-Cola Company and December 18, 1991).
the share owners of Johnston Coca-Cola
Bottling Group named therein.
10.20 -- Registration Rights Agreement dated as Exhibit 10.25 to the Company's Annual
of December 15, 1993 among Coca-Cola Report on Form 10-K for the fiscal year
Enterprises, The Coca-Cola Company and ended December 31, 1993.
the share owners of the Coca-Cola
Bottling Company of Northeast Arkansas,
Inc.
10.21 -- Form of Bottle Contract, as amended. Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the fiscal year
ended December 10, 1988.
10.22 -- Letter Agreement dated March 15, 1989 Exhibit 10.23 to the Company's Annual
between Coca-Cola Enterprises and The Report on Form 10-K for the fiscal year
Coca-Cola Company with respect to the ended December 31, 1991.
Bottle Contracts, as amended by letter
agreement dated December 18, 1991.
10.23 -- Form of Tolling Agreement between The Exhibit 10.41 to the Company's Annual
Coca-Cola Company and various Company Report on Form 10-K for the fiscal year
bottlers. ended January 2, 1987.
10.24 -- Sweetener Sales Agreement -- Bottler Exhibit 10.30 to the Company's Annual
between The Coca-Cola Company and Report on Form 10-K for the fiscal year
various Company bottlers. ended December 31, 1992.
10.25 -- Second Lease Amendment to Lease Exhibit 10.25 to the Company's Annual
Agreement dated July 1, 1987 by and Report on Form 10-K for the fiscal
between The Coca-Cola Company and year ended December 31, 1994.
Coca-Cola Enterprises, as Tenant, as
previously amended June 19, 1992.
10.26 -- Share Repurchase Agreement dated January Exhibit 10.44 to the Company's Annual
1, 1991 between The Coca-Cola Company Report on Form 10-K for the fiscal year
and Coca-Cola Enterprises. ended December 28, 1990.
11 -- Statement re computation of per share Exhibit 11 to the Company's Annual Report
earnings. on Form 10-K for the fiscal year ended
December 31, 1994.
12 -- Statement re computation of ratios. Exhibit 12 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994.
21 -- Subsidiaries of the Registrant. Exhibit 21 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
OR FILED HEREWITH (THE COMPANY'S CURRENT,
QUARTERLY, AND ANNUAL REPORTS ARE FILED
EXHIBIT WITH THE SECURITIES AND EXCHANGE
NUMBER DESCRIPTION COMMISSION UNDER FILE NO. 01-09300)
- ------ ---------------------------------------- --------------------------------------------
<C> <C> <S> <C>
23 -- Consent of Independent Auditors. Filed herewith.
24 -- Powers of Attorney. Exhibit 24 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994.
27 -- Financial Data Schedule. Exhibit 27 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1994.
- ---------------
</TABLE>
* Management contracts and compensatory plans as arrangements required to be
filed as an exhibit to this form pursuant to Item 14(c).
(B) REPORTS ON FORM 8-K.
On November 4, 1994, the Company filed a Current Report on Form 8-K, the
date of which report was October 18, 1994, regarding the Company's financial
results for the third quarter and the first nine months of 1994.
(C) EXHIBITS
See Item 14(a)(3) above.
(D) FINANCIAL STATEMENT SCHEDULES
See Item 14(a)(2) above.
55
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ S. K. JOHNSTON, JR.
------------------------------------
S. K. Johnston, Jr.
Vice Chairman and Chief Executive
Officer
56
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts for the fiscal years ended December
31, 1994, 1993 and 1992................................................ F-2
</TABLE>
F-1
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
COCA-COLA ENTERPRISES INC.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------- ---------- ----------------------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACCOUNTS-- DEDUCTIONS -- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ---------------------------------- ---------- ---------- ---------------- ------------ ---------
(IN MILLIONS)
FISCAL YEAR ENDED:
DECEMBER 31, 1994
Allowance for losses on trade
accounts.................... $ 33 $ 11 $ -- $ 10(b) $ 34
Valuation allowance for
deferred tax assets......... 105 7 -- -- 112
DECEMBER 31, 1993
Allowance for losses on trade
accounts.................... $ 31 $ 13 $ 5(a) $ 16(b) $ 33
Valuation allowance for
deferred tax assets......... 86 19 -- -- 105
DECEMBER 31, 1992
Allowance for losses on trade
accounts.................... $ 22 $ 13 $ 4(a) $ 8(b) $ 31
Valuation allowance for
deferred tax assets......... -- 9 77(c) -- 86
</TABLE>
- ---------------
(a) Principally represents allowances for losses on trade accounts of acquired
companies at date of acquisition and recoveries of amounts previously
charged off.
(b) Charge off of uncollectible accounts.
(c) Adoption of FAS 109 as of January 1, 1992.
F-2
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements of
Coca-Cola Enterprises Inc. listed below of our report dated January 30, 1995,
with respect to the consolidated financial statements and schedule of
Coca-Cola Enterprises Inc. included in this Annual Report (Form 10-K/A) for the
year ended December 31, 1994.
- - Registration Statement No. 33-18039 on Form S-8 dated October 19, 1987 and
related Prospectus
- - Registration Statement No. 33-18495 on Form S-8 dated November 13, 1987 and
related Prospectus
- - Registration Statement No. 33-38771 on Form S-8 dated January 31, 1991 and
related Prospectus
- - Registration Statement No. 33-44448 on Form S-8 dated December 17, 1991 and
related Prospectus
- - Registration Statement No. 33-46675 on Form S-3 dated May 26, 1992 and
related Prospectus
- - Registration Statement No. 33-48482 on Form S-8 dated June 17, 1992 and
related Prospectus
- - Registration Statement No. 33-53219 on Form S-8 dated April 22, 1994 and
related Prospectus
- - Registration Statement No. 33-53221 on Form S-8 dated April 22, 1994 and
related Prospectus
- - Registration Statement No. 33-53223 on Form S-8 dated April 22, 1994 and
related Prospectus
- - Registration Statement No. 33-53225 on Form S-8 dated April 22, 1994 and
related Prospectus
- - Registration Statement No. 33-53227 on Form S-8 dated April 22, 1994 and
related Prospectus
- - Registration Statement No. 33-53229 on Form S-8 dated April 22, 1994 and
related Prospectus
- - Registration Statement No. 33-54951 on Form S-8 dated August 5, 1994 and
related Prospectus
- - Registration Statement No. 33-54953 on Form S-8 dated August 5, 1994 and
related Prospectus
- - Registration Statement No. 33-58695 on Form S-8, as amended, dated May 15,
1995 and related Prospectus
- - Registration Statement No. 33-58697 on Form S-8, as amended, dated May 15,
1995 and related Prospectus
- - Registration Statement No. 33-58699 on Form S-8, as amended, dated May 15,
1995 and related Prospectus
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
October 31, 1995
