<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended October 2, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-09300
COCA-COLA ENTERPRISES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-0503352
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 WINDY RIDGE PARKWAY, SUITE 700
ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
770-989-3000
(Registrant's telephone number, including area code)
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock.
391,927,091 SHARES OF $1 PAR VALUE COMMON STOCK AS OF NOVEMBER 3, 1998
================================================================================
<PAGE> 2
COCA-COLA ENTERPRISES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED OCTOBER 2, 1998
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the Quarters
ended October 2, 1998 and September 26, 1997.................... 1
Condensed Consolidated Statements of Income for the Nine Months
ended October 2, 1998 and September 26, 1997.................... 2
Condensed Consolidated Balance Sheets as of October 2, 1998
and December 31, 1997........................................... 3
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended October 2, 1998 and September 26, 1997............. 5
Notes to Condensed Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................ 23
Item 2. Changes in Securities............................................ 23
Item 6. Exhibits and Reports on Form 8-K................................. 24
Signatures................................................................ 25
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED; IN MILLIONS EXCEPT PER SHARE DATA)
QUARTER ENDED
-----------------------------
OCTOBER 2, SEPTEMBER 26,
1998 1997
------------- -------------
NET OPERATING REVENUES.......................... $3,528 $3,183
Cost of sales................................... 2,207 2,017
------ ------
GROSS PROFIT.................................... 1,321 1,166
Selling, delivery, and administrative expenses.. 1,013 939
------ ------
OPERATING INCOME................................ 308 227
Interest expense, net........................... 179 143
------ ------
INCOME BEFORE INCOME TAXES...................... 129 84
Income tax expense before rate change benefit... 42 30
Income tax rate change benefit.................. (29) (58)
------ ------
NET INCOME...................................... 116 112
Preferred stock dividends....................... 1 --
------ ------
NET INCOME APPLICABLE TO COMMON SHARE OWNERS.... $ 115 $ 112
====== ======
BASIC NET INCOME PER SHARE APPLICABLE TO
COMMON SHARE OWNERS............................ $ 0.29 $ 0.29
====== ======
DILUTED NET INCOME PER SHARE APPLICABLE TO
COMMON SHARE OWNERS............................ $ 0.28 $ 0.28
====== ======
See Notes to Condensed Consolidated Financial Statements.
-1-
<PAGE> 4
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED; IN MILLIONS EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
-----------------------------
OCTOBER 2, SEPTEMBER 26,
1998 1997
------------- -------------
NET OPERATING REVENUES.......................... $10,173 $ 8,229
Cost of sales................................... 6,380 5,179
------- -------
GROSS PROFIT.................................... 3,793 3,050
Selling, delivery, and administrative expenses.. 3,054 2,455
------- -------
OPERATING INCOME................................ 739 595
Interest expense, net........................... 517 377
Other nonoperating expenses, net................ -- 6
------- -------
INCOME BEFORE INCOME TAXES...................... 222 212
Income tax expense before rate change benefit... 75 80
Income tax rate change benefit.................. (29) (58)
------- -------
NET INCOME...................................... 176 190
Preferred stock dividends....................... 1 2
------- -------
NET INCOME APPLICABLE TO COMMON SHARE OWNERS.... $ 175 $ 188
======= =======
BASIC NET INCOME PER SHARE APPLICABLE TO
COMMON SHARE OWNERS............................ $ 0.45 $ 0.49
======= =======
DILUTED NET INCOME PER SHARE APPLICABLE TO
COMMON SHARE OWNERS............................ $ 0.43 $ 0.48
======= =======
See Notes to Condensed Consolidated Financial Statements.
-2-
<PAGE> 5
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
OCTOBER 2, DECEMBER 31,
ASSETS 1998 1997
------------- -------------
(Unaudited)
CURRENT
Cash and cash investments, at cost
approximating market......................... $ 92 $ 45
Trade accounts receivable, less reserves of
$59 and $58 million, respectively............ 1,269 1,007
Inventories:
Finished goods............................... 391 330
Raw materials and supplies................... 174 132
------- -------
565 462
Current deferred income tax assets............. 73 70
Prepaid expenses and other current assets...... 272 229
------- -------
Total Current Assets....................... 2,271 1,813
PROPERTY, PLANT, AND EQUIPMENT
Land........................................... 321 297
Buildings and improvements..................... 1,128 1,065
Machinery and equipment........................ 5,621 4,653
------- -------
7,070 6,015
Less allowances for depreciation............... 2,728 2,295
------- -------
4,342 3,720
Construction in progress....................... 228 142
------- -------
Net Property, Plant, and Equipment........... 4,570 3,862
FRANCHISES AND OTHER NONCURRENT ASSETS, NET...... 13,529 11,812
------- -------
$20,370 $17,487
======= =======
See Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE> 6
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT SHARE DATA)
OCTOBER 2, DECEMBER 31,
LIABILITIES AND SHARE-OWNERS' EQUITY 1998 1997
------------- -------------
(Unaudited)
CURRENT
Accounts payable and accrued expenses.......... $ 2,098 $ 2,000
Current portion of long-term debt.............. 1,447 1,032
------- -------
Total Current Liabilities.................. 3,545 3,032
LONG-TERM DEBT, LESS CURRENT MATURITIES.......... 9,097 7,760
RETIREMENT AND INSURANCE PROGRAMS AND OTHER
LONG-TERM OBLIGATIONS.......................... 1,005 917
LONG-TERM DEFERRED INCOME TAX LIABILITIES........ 4,564 3,996
SHARE-OWNERS' EQUITY
Preferred stock................................ 48 --
Common stock, $1 par value - Authorized -
1,000,000,000 shares; Issued - 391,514,783
and 442,971,597 shares, respectively......... 446 443
Additional paid-in capital..................... 1,937 1,364
Reinvested earnings............................ 509 374
Cumulative comprehensive income adjustments.... (32) (16)
Common stock in treasury, at cost (54,124,917
and 56,418,084 shares, respectively)......... (749) (383)
------- -------
Total Share-Owners' Equity................. 2,159 1,782
------- -------
$20,370 $17,487
======= =======
-4-
<PAGE> 7
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN MILLIONS)
NINE MONTHS ENDED
-----------------------------
OCTOBER 2, SEPTEMBER 26,
1998 1997
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................... $ 176 $ 190
Adjustments to reconcile net income to net
cash derived from operating activities:
Depreciation............................... 526 402
Amortization............................... 286 288
Deferred income tax provision (benefit).... (37) (85)
Net changes in current assets and current
liabilities.............................. (376) (196)
Additional nonoperating cash flows......... 45 60
------- -------
Net cash derived from operating activities..... 620 659
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets...................... (1,120) (659)
Fixed asset disposals.......................... 6 16
Cash investments in bottling businesses, net
of cash acquired............................. (225) (1,986)
Other investing activities..................... (69) --
------- -------
Net cash used in investing activities.......... (1,408) (2,629)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt..................... 3,635 3,258
Payments on long-term debt..................... (2,322) (1,267)
Stock purchases for treasury................... (454) --
Cash dividend payments on common and
preferred stock.............................. (42) (14)
Exercise of employee stock options............. 18 10
Additional financing activities................ -- (5)
------- -------
Net cash derived from financing activities..... 835 1,982
------- -------
NET INCREASE IN CASH AND CASH INVESTMENTS........ 47 12
Cash and cash investments at beginning of
period....................................... 45 47
------- -------
CASH AND CASH INVESTMENTS AT END OF PERIOD....... $ 92 $ 59
======= =======
SUPPLEMENTAL NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisitions:
Fair value of assets acquired................ $ 2,248 $ 6,167
Debt issued and assumed...................... (497) (1,620)
Other liabilities assumed.................... (865) (2,561)
Equity securities issued..................... (661) --
------- -------
Cash paid, net of cash acquired.............. $ 225 $ 1,986
======= =======
See Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE> 8
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles (GAAP) for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all information and
footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments consisting of normal recurring accruals considered
necessary for a fair presentation have been included. For further information,
refer to the consolidated financial statements and footnotes included in the
Company's annual report on Form 10-K for the year ended December 31, 1997.
NOTE B - SEASONALITY OF BUSINESS
Operating results for the third quarter and nine months ended October 2, 1998
are not indicative of results that may be expected for the year ending December
31, 1998 because of business seasonality. This seasonality results from a
combination of higher unit sales of the Company's products in the second and
third quarters versus the first and fourth quarters of the year and the methods
of accounting for fixed costs such as depreciation, amortization, and interest
expense which are not significantly impacted by business seasonality. In
addition, the first nine months of 1998 includes four additional selling days
than the first nine months of 1997, influencing period comparisons.
NOTE C - ACQUISITIONS
Completed Transactions
On January 30, 1998, the Company acquired the Coca-Cola bottling operations,
along with the exclusive rights to manufacture and distribute products of The
Coca-Cola Company, in Luxembourg. The total transaction value (purchase price
and acquired debt, net of cash acquired) for this acquisition was approximately
$20 million. Also in January 1998, the Company acquired the remaining shares of
The Coca-Cola Bottling Company of New York, Inc. (Coke New York) held by
minority share owners.
On June 5, 1998, the Company acquired CCBG Corporation and Texas Bottling Group,
Inc. (collectively known as Coke Southwest). The acquisition was completed for a
transaction value (purchase price and acquired debt) of approximately $1.1
billion with 55% of the transaction funded through the issuance of 17.7 million
shares of the Company's common stock and the remaining 45% funded through debt
issued and assumed. Coke Southwest operates in parts of Colorado, Kansas, New
Mexico, Oklahoma, and Texas.
On June 12, 1998, the Company acquired The Coca-Cola Bottling Company of
Bellingham. The Bellingham bottler is located in the Northwest corner of
Washington State. Additionally, on August 7, 1998 the Company purchased Great
Plains Bottlers and Canners, Inc. (Great Plains), a Coca-Cola and Dr Pepper
bottler. Great Plains operates in parts of Kansas, Nebraska, and South Dakota.
These transactions were funded through a combination of cash, a promissory note,
and the issuance of convertible preferred stock.
-6-
<PAGE> 9
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C - ACQUISITIONS (CONTINUED)
Pending Transactions
The Company has signed letters of intent to acquire the following bottlers in
the United States. These transactions are expected to close before December 31,
1998 for a combined transaction value of approximately $900 million.
- Soo Coca-Cola Bottling, Inc. located in the upper peninsula of
Michigan,
- Wolslager Group operating in parts of Texas, New Mexico, and Arizona,
- Cameron Coca-Cola Bottling operating in Pittsburgh, Pennsylvania and
portions of Ohio and West Virginia,
- Montgomery Coca-Cola Bottling Company located in southern Alabama,
- Bryan Coca-Cola Bottling Co., Nacogdoches Coca-Cola Bottling Company,
and Sulphur Springs Coca-Cola Bottling Company all located in eastern
Texas, and
- The Coca-Cola, Dr Pepper Bottling Company of Albuquerque operating in
portions of western New Mexico.
The effect of the following completed acquisitions were not considered in the
unaudited pro forma financial information presented below because they are not
significant to the Company's consolidated financial results:
- Luxembourg bottler,
- Coke Southwest,
- The Coca-Cola Bottling Company of Bellingham, and
- Great Plains.
The following table summarizes unaudited pro forma financial information of the
Company as if the following completed acquisitions were acquired effective
January 1, 1997:
- Coca-Cola Beverages Ltd.,
- Coke New York, and
- Amalgamated Beverages Great Britain Limited.
-7-
<PAGE> 10
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C - ACQUISITIONS (CONTINUED)
The unaudited pro forma financial information presented below for the third
quarter and nine months ended September 26, 1997 reflects adjustments for: (i)
financing of the transactions at an estimated financing cost for each
acquisition, (ii) amortization of the value of the acquired franchise assets
over 40 years, and (iii) the income tax effect of the foregoing (in millions
except per share data):
QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 26, SEPTEMBER 26,
1997 1997
------------- -------------
Net Operating Revenues......................... $3,327 $9,328
====== ======
Pro Forma Net Income Applicable to Common
Share Owners................................. $ 101 $ 134
====== ======
Pro Forma Basic Net Income Per Share
Applicable to Common Share Owners............ $ 0.26 $ 0.35
====== ======
Pro Forma Diluted Net Income Per Share
Applicable to Common Share Owners............ $ 0.25 $ 0.34
====== ======
-8-
<PAGE> 11
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - LONG-TERM DEBT
Long-term debt balances, including current maturities, are adjusted for the
effects of interest rate and currency swap agreements (in millions):
OCTOBER 2, DECEMBER 31,
1998 1997
------------- -------------
Commercial Paper (weighted average rates of
4.5% and 4.3%)(A)........................... $ 1,728 $ 773
Canadian dollar loans payable (weighted
average rates of 5.8% and 4.2%)............. 859 892
British pound sterling loans payable (weighted
average rates of 7.7% and 6.9%)............. 539 1,194
Notes due 1999 - 2037 (weighted average rate
of 7.2%).................................... 1,550 1,550
Debentures due 2012 - 2098 (weighted average
rates of 7.4% and 7.6%)(B).................. 3,800 2,900
8.35% Zero Coupon Notes due 2020 (net of
unamortized discount of $1,605 and $1,625,
respectively)............................... 327 307
Euro notes due 2002 - 2011 (weighted average
rates of 7.2% and 7.5%)(B).................. 1,179 531
Various foreign currency debt................. 325 138
Additional debt(A)............................ 189 504
------- -------
Long-term debt including effect of net asset
positions of currency swaps............... 10,496 8,789
Net asset positions of currency swap
agreements(C)............................. 48 3
------- -------
$10,544 $ 8,792
======= =======
Aggregate maturities of long-term debt for the five twelve-month periods
subsequent to October 2, 1998 are as follow (in millions): 1999 - $1,447; 2000 -
$233; 2001 - $275; 2002 - $2,272; and 2003 - $530.
(A) At October 2, 1998 and December 31, 1997, $1,071 million and $957 million
of the Company's commercial paper and additional debt had been effectively
exchanged into non-U.S. dollar obligations through currency swap
arrangements. These currency swap arrangements provide for the exchange of
U.S. dollars into Belgian francs, Canadian dollars, French francs, Dutch
florins, and British pounds sterling, and also provide for the periodic
exchange of interest payments. The Company intends to renew these
short-term currency swap arrangements as they expire. These currency swap
arrangements hedge the Company's net investments in international
subsidiaries.
-9-
<PAGE> 12
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - LONG-TERM DEBT (CONTINUED)
(B) During the first nine months of 1998 the Company issued $900 million of
debentures due 2028- 2098 with a weighted average interest rate of 6.82%
under its shelf registration statement with the Securities and Exchange
Commission and $666 million in notes due 2003 - 2011 with a weighted
average interest rate of 6.9% under its euro medium term note program.
(C) The net asset positions of currency swap agreements are included in the
balance sheet as assets.
The Company has a $1.5 billion multicurrency revolving bank credit agreement
maturing in November 2001. This credit facility supports the commercial paper
program and other borrowings as needed. No amounts were outstanding under this
credit agreement at October 2, 1998; at December 31, 1997, $422 million of
short-term British pound sterling loans had been issued under this credit
agreement. At October 2, 1998 and December 31, 1997, a total of $1.5 billion of
borrowings due in the next 12 months was classified as maturing after one year
under this agreement due to the Company's ability and intent to refinance these
borrowings on a long-term basis.
At October 2, 1998 and December 31, 1997, the Company had approximately $1,546
million and $1,217 million, respectively, outstanding under various short-term
credit facilities with additional amounts available of $1,627 million and $1,238
million, respectively. Included in the outstanding balance at October 2, 1998
and December 31, 1997 is approximately $859 million and $866 million,
respectively, of Canadian dollar-denominated loans issued under revolving credit
facilities. Because the Company has the option to convert these revolving credit
facilities to a five-year loan, amounts have been classified as maturing after
one year.
At October 2, 1998 and December 31, 1997, the Company had available for issuance
approximately $1.1 billion and $2 billion, respectively, in registered debt
securities under a registration statement with the Securities and Exchange
Commission and approximately $1.3 billion and $2 billion, respectively, in debt
securities under its euro medium term note program. On November 2, 1998, the
Company issued an additional $600 million in 5.75% debentures due 2008 under its
shelf registration statement with the Securities Exchange commission.
The multicurrency revolving bank credit agreement and the outstanding notes and
debentures contain various provisions which, among other things, require the
Company to maintain a defined leverage ratio and limit the incurrence of certain
liens or encumbrances in excess of defined amounts. These requirements currently
are not, and it is not anticipated they will become, restrictive on the
Company's liquidity or capital resources.
-10-
<PAGE> 13
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E - PREFERRED STOCK
In the second quarter of 1998 the Company was authorized by the Board of
Directors to issue 120,000 shares of $1 par value voting convertible preferred
stock with a stated value of $100 per share (Bellingham series). In connection
with the June 1998 acquisition of The Coca-Cola Bottling Company of Bellingham,
the Company issued 96,600 Bellingham series shares of preferred stock. The
Bellingham series pays quarterly dividends equaling 4% annually. The
shareholders have the option to convert each share into one share of common
stock prior to June 30, 2001, at which time all shares must be converted. In the
third quarter of 1998 the Company was authorized by the Board of Directors to
issue 450,000 shares of $1 par value voting convertible preferred stock with a
stated value of $100 per share (Great Plains series). The Company issued 392,464
Great Plains series shares of preferred stock on August 7, 1998 in connection
with the acquisition of Great Plains. The Great Plains series pays quarterly
dividends equaling 8% annually. The shareholders have the option to convert each
share into one share of common stock prior to August 7, 2003, at which time all
shares must be converted.
NOTE F - SHARE REPURCHASES
The Company can repurchase shares in the open market and in privately negotiated
transactions based on prevailing market conditions under a share repurchase
program authorizing the repurchase of up to 30 million shares. The Company
repurchased 15,444,360 shares of common stock during the first nine months of
1998, for an aggregate cost of approximately $454 million. Management considers
market conditions and alternative uses of cash and/or debt, balance sheet
ratios, and share-owner returns when evaluating share repurchases. Repurchased
shares are added to treasury stock and are available for general corporate
purposes including acquisition financing and the funding of various employee
benefit and compensation plans.
NOTE G - INCOME TAXES
The Company's effective tax rates for the first nine months of 1998 and 1997
were 34% and 38%, respectively. A reconciliation of the income tax provision at
the statutory federal rate to the Company's actual income tax provision follows
(in millions):
NINE MONTHS ENDED
-----------------------------
OCTOBER 2, SEPTEMBER 26,
1998 1997
------------- -------------
U.S. federal statutory expense.............. $ 78 $ 74
State expense, net of federal benefit....... 5 8
Taxation of European and Canadian
operations, net........................... (20) (16)
Valuation allowance provision............... 4 10
Nondeductible items......................... 7 5
Other, net.................................. 1 (1)
----- -----
$ 75 $ 80
===== =====
-11-
<PAGE> 14
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE G - INCOME TAXES (CONTINUED)
In July 1998, the United Kingdom's income tax rate was reduced from 31% to 30%,
effective April 1, 1999. This rate change reduced deferred tax liabilities
associated with the Company's operations in the United Kingdom by $29 million or
$0.07 per common share. This deferred tax liability reduction was recognized as
a credit to income tax expense in the third quarter of 1998.
NOTE H - STOCK-BASED COMPENSATION PLANS
An aggregate 2,570,000 shares of common stock were issued during the first nine
months of 1998 from the exercise of stock options.
The Company has granted 5,048,000 service-vested stock options to certain
executive and management level employees and 47,000 stock options to
non-employee members of the Board of Directors in 1998. All options vest over a
five-year period or ratably over a three-year period and expire ten years from
the date of grant. Of the total options granted, 1,404,000 were granted at an
exercise price equal to the fair market value of the stock on the grant date,
and 3,691,000 were premium-priced options.
NOTE I - COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes new rules for reporting comprehensive income, comprised of net
income and other adjustments to comprehensive income such as foreign currency
translation adjustments and hedges of net investments in foreign subsidiaries.
The adoption of this statement had no impact on the Company's net income or
share-owners' equity.
A reconciliation of comprehensive income follows (in millions):
QUARTER ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
OCTOBER 2, SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26,
1998 1997 1998 1997
------------- ------------- ------------- -------------
Net income............. $ 116 $ 112 $ 176 $ 190
Currency items,
including tax
effects of hedges.... (5) (30) (16) (73)
----- ----- ----- -----
Comprehensive income... $ 111 $ 82 $ 160 $ 117
===== ===== ===== =====
-12-
<PAGE> 15
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE J - EARNINGS PER SHARE
In the first quarter of 1998, dividends in the amount of $0.025 per common share
were declared for share owners of record on April 1, 1998. On April 17, 1998,
the Company's Board of Directors approved an increase in the regular quarterly
dividend to $0.04 per common share. This dividend increase was effective and
payable July 1, 1998. Dividends are declared at the discretion of the Company's
Board of Directors.
The following table presents information concerning basic and diluted earnings
per share (in millions except per share data; per share data is calculated prior
to rounding to millions):
QUARTER ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
OCTOBER 2, SEPTEMBER 26, OCTOBER 2, SEPTEMBER 26,
1998 1997 1998 1997
------------- ------------- ------------- -------------
Net income............. $ 116 $ 112 $ 176 $ 190
Preferred Stock
Dividends............ 1 -- 1 2
----- ----- ----- -----
Basic and Diluted Net
Income Applicable to
Common Share Owners.. $ 115 $ 112 $ 175 $ 188
===== ===== ===== =====
Basic Average Common
Shares Outstanding... 398 386 393 382
Effect of Dilutive
Securities:
Stock Compensation
Awards............. 12 13 13 12
----- ----- ----- -----
Diluted Average Common
Shares Outstanding... 410 399 406 394
===== ===== ===== =====
Basic Net Income Per
Share Applicable to
Common Share Owners.. $0.29 $0.29 $0.45 $0.49
===== ===== ===== =====
Diluted Net Income Per
Share Applicable to
Common Share Owners.. $0.28 $0.28 $0.43 $0.48
===== ===== ===== =====
-13-
<PAGE> 16
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE K - GEOGRAPHIC OPERATING INFORMATION
The Company operates in one industry: the marketing, distribution, and
production of bottle and can liquid nonalcoholic refreshments. On October 2,
1998, the Company operated in 45 states in the United States, the District of
Columbia, and in the 10 provinces of Canada (collectively referred to as the
Company's North American operations), and in Belgium, Great Britain, most of
France, Luxembourg, and the Netherlands (collectively referred to as the
Company's European operations).
The following presents net operating revenues for the nine months ended October
2, 1998 and September 26, 1997 and long-lived assets as of October 2, 1998 and
December 31, 1997 by geographic territory (in millions):
1998 1997
--------------------- ---------------------
NET(A) LONG- NET(B) LONG-
OPERATING LIVED OPERATING LIVED
REVENUES ASSETS REVENUES ASSETS
--------- --------- --------- ---------
North American............. $ 7,635 $13,531 $ 5,944 $11,177
European................... 2,538 4,569 2,285 4,242
------- ------- ------- -------
Consolidated............... $10,173 $18,100 $ 8,229 $15,419
======= ======= ======= =======
(A) 1998 net operating revenues include results beginning June 5, 1998 for the
Coke Southwest acquisition acquired in second-quarter 1998. Therefore,
reported 1998 information is not indicative of full-year results.
(B) 1997 net operating revenues include the results of operations for the New
York and Canadian bottlers beginning in the third quarter of 1997 and
include results beginning March 1997 for the Great Britain bottler acquired
in first-quarter 1997. Additionally, 1997 net operating revenues do not
include the results for the Coke Southwest acquisition completed in June
1998. Therefore, reported 1997 information is not indicative of full-year
results.
The Company has no material amounts of sales or transfers between North American
and European operations and no significant United States export sales.
NOTE L - CONTINGENCIES
In North America, the Company purchases PET (plastic) bottles from manufacturing
cooperatives. The Company and its subsidiaries have guaranteed payment of up to
$281 million of indebtedness owed by these manufacturing cooperatives to third
parties. At October 2, 1998, these cooperatives had approximately $155 million
of indebtedness guaranteed by the Company. The Company has also issued letters
of credit aggregating approximately $156 million under self-insurance programs.
The Company is a defendant in various litigation matters generally arising out
of the normal course of business. Although it is difficult to predict the
ultimate outcome of these cases, management believes the ultimate costs would
not materially affect the Company's financial position, results of operations,
or liquidity.
-14-
<PAGE> 17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS SUMMARY
Coca-Cola Enterprises Inc. (the Company) is the world's largest marketer,
distributor, and producer of bottled and canned liquid nonalcoholic refreshment.
The Company distributes approximately 20% of The Coca-Cola Company's world-wide
volume and is the largest anchor bottler in the Coca-Cola system. In the United
States and Canada, we distribute more than 65% of The Coca-Cola Company's bottle
and can products. We are also the sole licensed bottler for products of The
Coca-Cola Company in Belgium, Great Britain, Luxembourg, the Netherlands, and
most of France.
Management's discussion and analysis should be read in conjunction with the
Company's condensed consolidated financial statements and the accompanying
footnotes along with the cautionary statements at the end of this section.
RESULTS OF OPERATIONS
OVERVIEW
Consolidated cash operating profit, or net income before deducting interest,
taxes, depreciation, amortization, and other nonoperating expenses, reached
$1,551 million in the first nine months of 1998, 21% ahead of reported 1997
results. As expected, gross profit, operating, and net income margins improved
over comparable 1997 margins.
Comparable operating results are determined by adjusting reported 1998
performance to exclude results for the recently completed Coke Southwest
acquisition and by adjusting reported 1997 performance to include results of
material 1997 acquisitions as if they occurred on January 1, 1997. After
adjusting 1997 comparable cash operating profit for the effects of four
additional selling days included in first-quarter 1998 and the impact of
currency translations, comparable cash operating profit growth for the first
nine months of 1998 was 10%.
Management's primary objective is to deliver a superior investment return to our
share owners through long-term increases in operating cash flows and profitable
increases in sales volume. In line with this objective, we have focused on
managing the volume, net revenues, and cost equation to maximize results while
continuing to integrate and expand our operations through acquisitions and
infrastructure investments in North America and Europe. Our strong brand
portfolio combined with our emphasis on local market execution and our
significant investments in infrastructure are driving our long-term growth.
-15-
<PAGE> 18
The tables included in management's discussion and analysis summarize changes in
key operating information on a reported and comparable basis for the third
quarter and first nine months of 1998.
CASH OPERATING PROFIT (COP)
In the opinion of management, COP is one of the key standards for measuring our
operating performance. COP is used by management as an additional indicator of
operating performance and not as a replacement of measures such as cash flows
from operating activities and operating income as defined and required by
generally accepted accounting principles.
- --------------------------------------------------------------------------------
THIRD-QUARTER 1998 NINE-MONTHS 1998
---------------------- ---------------------
REPORTED COMPARABLE REPORTED COMPARABLE
CHANGE CHANGE CHANGE CHANGE
- --------------------------------------------------------------------------------
Cash Operating Profit:
Consolidated 22% 15% 21% 11%
Currency-neutral 15% 10%
- --------------------------------------------------------------------------------
The reported COP growth rates are affected by acquisitions completed in 1997 and
1998 and by the 4 additional selling days in first-quarter 1998. Comparable cash
operating profit growth is impacted by the inclusion of operating results for
the Canadian and New York acquisitions for the first seven months of 1997,
periods prior to our ownership. Third quarter 1998 comparable cash operating
profit growth rate reflects the Company's focus on maximizing the effectiveness
of marketing and infrastructure initiatives, jointly developed and incrementally
funded, with The Coca-Cola Company, leveraging existing infrastructure and
controlling operating expenses.
VOLUME
Volume results were driven by growth in brands of The Coca-Cola Company with
strong performance in Coca-Cola classic, diet Coke, Coca-Cola light, Barq's,
Fanta, Sprite, and the Company's noncarbonated brand portfolio. Comparable
volume information has been adjusted for acquisitions and for the 4 additional
selling days in the first quarter of 1998.
- --------------------------------------------------------------------------------
THIRD-QUARTER 1998 NINE-MONTHS 1998
---------------------- ---------------------
REPORTED COMPARABLE REPORTED COMPARABLE
CHANGE CHANGE CHANGE CHANGE
- --------------------------------------------------------------------------------
Physical Case Bottle and Can
Volume:
Consolidated 9% 1 % 23% 5%
North American Territories 3 % 6%
European Territories (8)% 3%
- --------------------------------------------------------------------------------
-16-
<PAGE> 19
VOLUME (CONTINUED)
As expected, North American volume growth was slower in the third quarter of
1998 than in the first half of the year. The third-quarter 1998 growth rate
reflects the difficult comparison created by the timing of the July 4th holiday,
which was included in the third quarter of 1997, but in the second quarter of
1998. The 8% decrease in the European volume in third-quarter 1998 reflects the
strong 15% growth experienced in the third quarter of 1997 and the impact of the
unseasonably cold and rainy weather experienced throughout the third quarter of
1998. For the third quarter and first nine months of 1998, our European
operations represented 21% and 23%, respectively, of physical case bottle and
can volume.
NET OPERATING REVENUES AND COST OF SALES
In the third quarter of 1998, net operating revenues were up 11% to $3.5
billion. Nine-month 1998 operating revenues increased 24% to $10.2 billion. Our
operations in North America represented 76% and 75% of third-quarter and
nine-month 1998 net operating revenues, respectively.
- --------------------------------------------------------------------------------
THIRD-QUARTER 1998 NINE-MONTHS 1998
---------------------- ---------------------
REPORTED COMPARABLE REPORTED COMPARABLE
CHANGE CHANGE CHANGE CHANGE
- --------------------------------------------------------------------------------
Net Revenues Per Case
(Bottle and Can) 1.5% 1.5% 0.5% Flat
Currency-neutral 2% 1 %
- --------------------------------------------------------------------------------
Cost of Sales Per Case
(Bottle and Can) Flat Flat 0.5% (0.5)%
Currency-neutral 1% 1 %
- --------------------------------------------------------------------------------
PER SHARE DATA
In the first nine months of 1998, the Company generated basic and diluted net
income from operations of $0.45 and $0.43 per common share as compared to
reported 1997 basic and diluted net income of $0.49 and $0.48 per common share.
In both the third quarters of 1997 and 1998 basic net income per share was $0.29
while diluted net income per share was $0.28.
The third-quarter 1997 and 1998 net income per share include tax benefits
resulting from the reduction in the United Kingdom's corporate tax rate. In 1998
the benefit that resulted from this tax rate reduction was $29 million or $0.07
per common share while in 1997 the benefit was $58 million or $0.15 per common
share.
The Company repurchased 15,444,360 shares of common stock during the first nine
months of 1998 for an aggregate cost of approximately $454 million under its
share repurchase program. On April 17, 1998, the Company's Board of Directors
approved an increase of the regular quarterly dividend to $0.04 per common share
up from $0.025 per share. This dividend increase was effective and payable July
1, 1998 to holders of record at the close of business on June 19, 1998.
-17-
<PAGE> 20
SELLING, DELIVERY, AND ADMINISTRATIVE EXPENSES
In third-quarter 1998, consolidated selling, delivery, and administrative
expenses as a percent of net operating revenues decreased to 28.7% from
third-quarter 1997 results of 29.5%. Year-to-date 1998 consolidated selling,
delivery, and administrative expenses as a percent of net operating revenues
increased to 30.0% from 29.8% for the first nine months of 1997. These increases
result primarily from increases in infrastructure spending in New York and
Canada.
INTEREST EXPENSE
Third-quarter and year-to-date 1998 net interest expense increased from reported
1997 levels due to higher average debt balances from acquisitions. The weighted
average interest rate for third-quarter 1998 was 6.9% compared to 7.1% for
reported third-quarter 1997. The weighted average interest rate for the first
nine months of 1998 was 7.0% compared to 6.9% for reported nine months 1997 and
for reported full-year 1997.
INCOME TAX EXPENSE
The Company's effective tax rates for the first nine months of 1998 and 1997
were 34% and 38%, respectively. The effective tax rate for full-year 1997 was
37%. The reduction in the Company's projected 1998 effective tax rate is a
result of the favorable effect of our expanded operations in Europe, including
the favorable tax treatment granted to certain foreign operations under a tax
holiday expiring in the year 1999 and the Company's current expectations for
full-year 1998 earnings.
In July 1998, the United Kingdom's income tax rate was reduced from 31% to 30%
effective April 1, 1999. This rate change reduced deferred tax liabilities
associated with the Company's operations in the United Kingdom by $29 million or
$0.07 per common share. This deferred tax liability reduction was recognized as
a credit to income tax expense in the third quarter of 1998.
-18-
<PAGE> 21
CASH FLOW AND LIQUIDITY REVIEW
CAPITAL RESOURCES
Our sources of capital include, but are not limited to, the issuance of public
or private placement debt, bank borrowings, and the issuance of equity
securities. We believe that short-term and long-term capital resources available
to us are sufficient to fund our capital expenditure and working capital
requirements, scheduled debt payments, interest and income tax obligations,
dividends to our share owners, acquisitions, and for share repurchases.
For long-term financing needs, we had available approximately $1.1 billion in
registered debt securities for issuance under a registration statement with the
Securities and Exchange Commission and an additional $1.3 billion in debt
securities under the euro medium term note program at October 2, 1998. On
November 2, 1998, the Company issued an additional $600 million in 5.75%
debentures due 2008 under its shelf registration statement with the Securities
and Exchange Commission.
We satisfy seasonal working capital needs and other financing requirements with
bank borrowings and short-term borrowings under our commercial paper program and
other credit facilities. At October 2, 1998, we had a total amount outstanding
of approximately $1.6 billion under various short-term credit facilities, with
an additional $1.6 billion available for future use. We intend to continue to
refinance borrowings under our commercial paper program and our short-term
credit facilities with longer-term fixed and floating rate financings. At the
end of third-quarter 1998, the Company's debt portfolio was 68% fixed rate debt
and 32% floating rate debt.
SUMMARY OF CASH ACTIVITIES
Cash and cash investments increased $47 million during the first nine months of
1998 from net cash transactions. Our primary sources of cash during the first
nine months of 1998 were from the issuance of debt aggregating $3.6 billion and
from our operations that provided approximately $620 million. Our primary uses
of cash were for capital expenditures totaling $1.1 billion, long-term debt
payments totaling $2.3 billion, the repurchase of common stock for approximately
$454 million and acquisitions of bottling businesses for a net cash cost of
approximately $225 million.
Operating Activities: Operating activities resulted in $620 million of net cash
provided during the first nine months of 1998 compared to $659 million provided
by operations in the first nine months of 1997. The higher depreciation and
amortization expense in 1998 results from the effects of increased capital
spending and the effects of the 1997 and 1998 acquisitions.
Investing Activities: Net cash used in investing activities results from the
Company's continued capital investments in its infrastructure and the
acquisitions of bottling operations. Capital expenditures for year-to-date 1998
almost doubled over the same period in 1997, primarily because of the capital
investments made by our Canadian and New York operations. The Company has
increased its original expectations for capital spending from $1.1 billion to
between $1.4 and $1.6 billion for full-year 1998.
Financing Activities: The Company continues to refinance portions of its
short-term borrowings with longer-term fixed and floating rate debt. In the
first nine months of 1998, the Company issued $3.6 billion in notes and
debentures. During the first nine months of 1998, $454 million was used to
repurchase shares of the Company's common stock.
-19-
<PAGE> 22
FINANCIAL CONDITION
The increase in property, plant, and equipment results from capital expenditures
of approximately $1.1 billion in the first nine months of 1998 and the 1998
acquisitions. The increase in long-term debt is primarily a result of the
financing of our capital expenditures, funding of the share repurchase program,
and our 1998 acquisitions.
In the first nine months of 1998 activities in currency markets resulted in a
$16 million adjustment to the Company's comprehensive income. As currency
exchange rates fluctuate, translation of the statements of income for our
international businesses into U.S. dollars will affect the comparability of
revenues and expenses between periods.
KNOWN TRENDS AND UNCERTAINTIES
YEAR 2000 INITIATIVES
Our Year 2000 strategic plan identifies initiatives necessary to minimize
failures of electronic systems to process date sensitive information in the Year
2000 and thereafter. Our plan is subdivided into six functional areas of the
Company: Sales/Marketing, Human Resources, Cold Drink, Finance, Operations and
Corporate functions. These functional areas encompass both information
technology (IT) systems such as our financial and inventory applications and
non-IT systems such as production plant systems. Each functional area plan
details specific tasks needed to identify and inventory Year 2000 issues, taking
them through assessment, remediation, testing, certification and implementation.
By the end of 1997, we had substantially completed the identification and
inventory stages for our North American systems. By the end of second quarter
1998, we had also substantially completed these stages for our European systems.
The assessment and remediation processes are underway and the Company is using
both internal and external resources to reprogram, or replace where necessary,
and to test modifications. Projects are in various stages of completion. We
estimate that approximately 70% of the identified issues have been corrected.
As a result of the numerous systems used by companies that we have acquired in
recent years and also due to technological enhancements, we have had an ongoing
information systems development plan with scheduled replacements of systems
throughout the organization. Year 2000 compliance is a by-product of our
development plan. We have delayed certain IT projects in order to reassign
Company resources to the Year 2000 strategic plan. Delayed projects primarily
involve IT system enhancements which are not critical to our business.
-20-
<PAGE> 23
YEAR 2000 INITIATIVES (CONTINUED)
The remediation process is targeted to be 90% completed by the first quarter of
1999. Testing and certification of these systems and applications are targeted
for completion by mid-1999. The following table lists significant systems and
our projected completion dates with respect to Year 2000 readiness:
North American European
-------------- --------------
Revenue, billing and accounts receivable 1st Q - 1999 2nd Q - 1999
Order entry and fulfillment 1st Q - 1999 2nd Q - 1999
Inventory and cost accounting 3rd Q - 1999 2nd Q - 1999
Accounts payable and purchasing 3rd Q - 1999 2nd Q - 1999
Payroll 1st Q - 1999 2nd Q - 1999
General ledger 1st Q - 1999 2nd Q - 1999
Production processing 1st Q - 1999 2nd Q - 1999
Electronic Commerce (EDI) 3rd Q - 1999 4th Q - 1999
Other Non-IT Systems 2nd Q - 1999 2nd Q - 1999
We have incurred and expensed approximately $14 million to date in the
implementation of our Year 2000 strategic plan for both IT and non-IT systems.
The total cost through completion of our Year 2000 plan is estimated to be in
the range of $25 to $45 million. Plan costs have been budgeted in either our
regular operating budget or our capital expenditures budget. Our projected costs
are based on management's best estimates and actual results could differ as the
plan is implemented.
A critical step in our strategic plan is the coordination of Year 2000 readiness
with third parties. We are communicating with our significant suppliers and
customers to determine the extent to which the Company and it's interface
systems are vulnerable if the customer, supplier or a third party fails to
resolve their Year 2000 issues. We have become aware of two raw
material/packaging suppliers who appear to be having difficulty in achieving
Year 2000 readiness. We will continue to work with all our major trading
partners to understand the associated risks and plan for contingencies.
We believe that necessary modifications and replacements of our critical IT and
non-IT systems will be completed timely. If for any reason, our critical service
providers, suppliers or customers are unable to resolve their Year 2000 issues
in a timely manner, such matters could have a material impact on the Company's
results of operations. Specifically, the lack of Year 2000 readiness by raw
material/packaging suppliers could impact the availability and expected cost of
raw materials and, therefore, production.
-21-
<PAGE> 24
EURO CURRENCY CONVERSION
Companies conducting business in or having transactions denominated in certain
European currencies are facing the European Union's pending conversion to a new
common currency, the "euro." This conversion is expected to be implemented over
a three year period. On January 1, 1999, the euro will become the official
currency for accounting and tax purposes of several countries of the European
Union and the exchange rates between the euro and the local currencies will be
fixed. In 2002, the euro will replace the individual national currencies.
We have a multifunctional task force engaged to identify and ensure all euro
conversion compliance issues are addressed. However, because of the numerous
uncertainties associated with euro conversion compliance such as the effect on
the Company of noncompliance by third parties, we are unable to predict whether
the euro issue will ultimately have a material adverse impact on future
operating results or the financial condition of the Company.
ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," in June 1998. This statement
modifies the method of accounting for derivatives by requiring that all
derivatives be recorded at their fair values in a company's balance sheet. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999; early
adoption is allowed. If the Company's derivative and hedging transactions are
deemed material as of the date of adoption, the Company will record a cumulative
effect of a change in an accounting principle in its consolidated statement of
income. The Company has not yet determined the effect SFAS No. 133 will have on
the operating results or the financial position of the Company.
-22-
<PAGE> 25
CAUTIONARY STATEMENTS
Included in this report are several forward-looking management comments and
other statements that reflect management's current outlook for future periods.
As always, these expectations and projections are based on currently available
competitive, financial, and economic data, along with the Company's operating
plans, and are subject to future events and uncertainties. Among the events and
uncertainties which could adversely affect future periods are
lower-than-expected net pricing resulting from marketplace competition, an
inability to meet performance requirements for expected levels of marketing
support payments from The Coca-Cola Company, material changes from expectations
in the cost of raw materials and ingredients, an inability to achieve the
expected timing for returns on cold drink equipment and employee infrastructure
expenditures, an inability to meet projections for performance in newly acquired
territories, unexpected costs associated with Year 2000 compliance or the
business risk associated with Year 2000 noncompliance by customers and/or
suppliers, unexpected costs associated with conversion to the common European
currency, and unfavorable interest rate and currency fluctuations. We caution
readers that in addition to the above cautionary statements, all forward-looking
statements contained herein should be read in conjunction with the detailed
cautionary statements found on page 28 of the Company's Annual Report for the
fiscal year ended December 31, 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1998, Coca-Cola Bottling Company of Memphis, Tenn. (CCBC Memphis), a
subsidiary of the Company, received notice from the Environmental Protection
Agency (EPA) naming it as a potentially responsible party (PRP) at Gurley Pit
Superfund site in Edmondton, Arkansas. The Gurley Pit site was operated as a
waste disposal facility from 1970 to 1976. The EPA has already cleaned up the
site at a cost of approximately $10 million, and it now seeks to recover these
costs from PRPs. CCBC Memphis cannot yet determine whether it will incur
liability at this site and, if so, whether such liability would be material.
ITEM 2. CHANGES IN SECURITIES
On August 6, 1998 the Company issued 392,464 shares of the Company's Convertible
Preferred Stock - Great Plains Series, with an aggregate stated value of
$39,246,400, in connection with the acquisition by the Company of Great Plains
Bottlers & Canners, Inc. The aggregate value of the transaction was $44,000,000,
in the form of preferred stock, cash, assumed debt, and transaction costs. The
transaction was exempt from registration pursuant to Regulation D under the
Securities Act of 1933, as amended. This preferred stock is convertible at any
time at the option of any holder upon two days' prior written notice. All
preferred stock not already converted will be converted on August 7, 2003. Upon
conversion, each share of preferred stock will be converted into that number of
shares of the Company's Common Stock which is equal to (i) the stated value of
$100 per share plus an amount equal to all dividends accrued and unpaid thereon
to the date of conversion (whether or not declared), divided by (ii) the
Conversion Date Price. The Conversion Date Price means the average of the
closing sales price per share of the Company's Common Stock on the New York
Stock Exchange composite tape for the ten consecutive trading days immediately
prior to the second trading day prior to the conversion date.
-23-
<PAGE> 26
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
Exhibit Incorporated by Reference
Number Description or Filed Herewith
- -------- ----------------------------------- ---------------------------
12 Statements regarding computations filed herewith
of ratios
27 Financial Data Schedule (for SEC filed herewith
use only)
(b) Reports on Form 8-K:
During second-quarter 1998, the Company filed the following current reports on
Form 8-K:
Date of Report Description
- ------------------- -----------------------------------------------------------
July 21, 1998 Condensed Consolidated Statements of Operations and
Balance Sheet (unaudited) of the Company, filed July 23,
1998, reporting results of operations and financial
position for the second quarter of 1998.
September 8, 1998 Terms agreement, filed September 21, 1998, relating to
the offer and sale of the Company's 6.75% Debentures due
2028.
-24-
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COCA-COLA ENTERPRISES INC.
(Registrant)
Date: November 6, 1998 /s/ John R. Alm
-------------------------------
John R. Alm
Executive Vice President and
Chief Financial Officer
Date: November 6, 1998 /s/ O. Michael Whigham
-------------------------------
O. Michael Whigham
Vice President, Controller and
Principal Accounting Officer
-25-
<PAGE> 1
EXHIBIT 12
COCA-COLA ENTERPRISES INC.
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(In millions except ratios)
Quarter ended Nine months ended
--------------------- ---------------------
Oct. 2, Sept. 26, Oct. 2, Sept. 26,
1998 1997 1998 1997
--------- --------- --------- ---------
Computation of Earnings:
Earnings from continuing
operations before income
taxes....................... $129 $ 84 $222 $212
Add:
Interest expense............ 171 142 520 373
Amortization of
capitalized interest...... 0 0 1 1
Amortization of debt
premium/discount
and expenses.............. 7 6 20 18
Interest portion of rent
expense................... 8 8 21 19
---- ---- ---- ----
Earnings as Adjusted............ $315 $240 $784 $623
==== ==== ==== ====
Computation of Fixed Charges:
Interest expense.............. $171 $142 $520 $373
Capitalized interest.......... 2 1 4 1
Amortization of debt premium
/discount and expenses...... 7 6 20 18
Interest portion of rent
expense..................... 8 8 21 19
---- ---- ---- ----
Fixed Charges................... 188 157 565 411
Preferred Stock Dividends....... 0 0 0 3
---- ---- ---- ----
Combined Fixed Charges and
Preferred Stock Dividends.... $188 $157 $565 $414
==== ==== ==== ====
Ratio of Earnings to Fixed
Charges (a).................. 1.68 1.54 1.39 1.52
==== ==== ==== ====
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends (a).......... 1.68 1.54 1.39 1.51
==== ==== ==== ====
(a) Ratios were calculated prior to rounding to millions.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE FILER FOR THE PERIOD ENDED OCTOBER 2, 1998
INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED OCTOBER
2, 1998 (COMMISSION FILE NO. 001-9300) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> OCT-02-1998
<CASH> 92
<SECURITIES> 0
<RECEIVABLES> 1,328
<ALLOWANCES> 59
<INVENTORY> 565
<CURRENT-ASSETS> 2,271
<PP&E> 7,298
<DEPRECIATION> 2,728
<TOTAL-ASSETS> 20,370
<CURRENT-LIABILITIES> 3,545
<BONDS> 9,097
0
48
<COMMON> 446
<OTHER-SE> 1,665
<TOTAL-LIABILITY-AND-EQUITY> 20,370
<SALES> 10,173
<TOTAL-REVENUES> 10,173
<CGS> 6,380
<TOTAL-COSTS> 6,380
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 517
<INCOME-PRETAX> 222
<INCOME-TAX> 46
<INCOME-CONTINUING> 176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.43
</TABLE>
