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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] 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.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 58-0503352
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION
NUMBER)
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2500 WINDY RIDGE PARKWAY, ATLANTA, GEORGIA 30339
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(770) 989-3000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, par value $1.00 per share New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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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.
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Yes X No
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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 February 26, 1999 was $6,439,733,491.
There were 423,388,553 shares of Common Stock outstanding as of February
26, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Share Owners for the year
ended December 31, 1998, are incorporated by reference in Parts II and IV.
Portions of the registrant's Proxy Statement for the Annual Meeting of
Share Owners to be held on April 23, 1999 are incorporated by reference in Part
III hereof.
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS.................................................... 1
Introduction................................................ 1
Relationship With The Coca-Cola Company..................... 1
Bottler Acquisitions Since December 31, 1997................ 2
Territories................................................. 3
Products.................................................... 4
Marketing................................................... 5
Raw Materials............................................... 5
North American Beverage Agreements.......................... 6
European Beverage Agreements................................ 11
Competition................................................. 13
Employees................................................... 13
Governmental Regulation..................................... 13
Financial Information On Industry Segments And Geographic
Areas................................................ 16
ITEM 2. PROPERTIES.................................................. 16
ITEM 3. LEGAL PROCEEDINGS........................................... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 17
ITEM 4(A). EXECUTIVE OFFICERS OF THE COMPANY........................... 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................... 20
ITEM 6. SELECTED FINANCIAL DATA..................................... 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 20
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS..................................................... 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................. 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 21
ITEM 11. EXECUTIVE COMPENSATION...................................... 21
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K....................................................... 22
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PART I
ITEM 1. BUSINESS
INTRODUCTION
The Company is the world's largest marketer, distributor, and producer of
bottled and canned beverages of The Coca-Cola Company.
The Company was incorporated in 1944 under the laws of Delaware as a wholly
owned subsidiary of The Coca-Cola Company and became a public company in 1986.
At January 29, 1999, The Coca-Cola Company owned approximately 40% of the
Company's common stock.
The Company's bottling territories in North America and in Europe contain
approximately 353 million people. The Company estimates that it sold
approximately 3.8 billion equivalent cases (192 ounces of finished beverage
product) within its territories during 1998. About 90% of this volume consisted
of beverages produced and sold under licenses from The Coca-Cola Company.
The Company's Coca-Cola bottling rights within the United States are
perpetual; elsewhere, bottling rights have stated expiration dates. (See "North
American Beverage Agreements" and "European Beverage Agreements.")
References in this report to the "Company" include Coca-Cola Enterprises
Inc., and its subsidiaries and divisions, unless the context requires otherwise.
Population and sales data include bottling franchises acquired through January
31, 1999 as if they had been acquired January 1, 1998.
RELATIONSHIP WITH THE COCA-COLA COMPANY
The Coca-Cola Company is the Company's largest share owner. Four directors
of the Company are executive officers or former executive officers of The
Coca-Cola Company.
The Company and The Coca-Cola Company are parties to a number of
significant transactions and agreements incident to their respective businesses
and may enter into additional material transactions and agreements in the
future.
The Company conducts its business primarily under agreements with The
Coca-Cola Company. These agreements give the Company the exclusive right to
market, distribute, and produce beverage products of The Coca-Cola Company in
authorized containers in specified territories. These agreements provide The
Coca-Cola Company with the ability, in its sole discretion, to establish prices,
terms of payment, and other terms and conditions for the purchase of
concentrates and syrups from The Coca-Cola Company. See "North American Beverage
Agreements" and "European Beverage Agreements" below. Other significant
transactions and agreements include acquisitions of bottling territories,
arrangements for cooperative marketing, advertising expenditures, purchases of
sweeteners, and strategic marketing initiatives.
Since 1979, The Coca-Cola Company has assisted in the transfer of ownership
or financial restructuring of a majority of its United States bottler operations
and has assisted in similar transfers of bottlers operating outside the United
States. Certain bottlers and interests therein have been acquired by The
Coca-Cola Company, and certain of those have been sold to bottlers, including
the Company, which are believed by management of The Coca-Cola Company to be the
best suited to manage and develop these acquired operations. The Coca-Cola
Company has advised the Company that it may continue this reorganization of its
bottler system. See "Bottler Acquisitions Since December 31, 1997" below and
"Certain Relationships and Related Transactions -- Agreements and Transactions
with The Coca-Cola Company" in the Company's Proxy Statement for the Annual
Meeting of Share Owners to be held April 23, 1999 (the "Company's 1999 Proxy
Statement"); this information is incorporated by reference into Item 13 of this
report.
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BOTTLER ACQUISITIONS SINCE DECEMBER 31, 1997
Soutirages Luxembourgeois -- January 1, 1998.
Operating in Luxembourg
The Coca-Cola Bottling Group (Southwest), Inc. and Texas Bottling Group,
Inc. -- June 5, 1998.
Operating in Texas, Oklahoma, New Mexico, Colorado, and Kansas
The Coca-Cola Bottling Company of Bellingham -- June 12, 1998.
Operating in Washington State
Great Plains Bottlers and Canners, Inc. -- August 6, 1998.
Operating in Kansas, Nebraska, and South Dakota
Soo Coca-Cola Bottling, Inc. -- December 10, 1998.
Operating in the Upper Peninsula of Michigan
Magnolia Coca-Cola Bottling Company, The Coca-Cola Bottling Company of San
Angelo, The Coca-Cola Bottling Co. of Tucson, and Las Cruces Coca-Cola Bottling
Co. (NSL) (the Wolslager bottling group) -- December 31, 1998.
Operating in Texas, New Mexico, and Arizona
Cameron Coca-Cola Bottling Company, Inc. -- January 1, 1999.
Operating in Pittsburgh, Pennsylvania, Ohio, and West Virginia
Bryan Coca-Cola Bottling Company -- January 5, 1999.
Operating in East Texas
The Coca-Cola, Dr Pepper Bottling Company of Albuquerque -- January 6, 1999.
Operating in New Mexico and Arizona
Nacogdoches Coca-Cola Bottling Company and Sulphur Springs Coca-Cola Bottling
Company (the Ashcroft bottlers) -- January 7, 1999.
Operating in East Texas
Montgomery Coca-Cola Bottling Company, Inc. -- January 13, 1999.
Operating in Montgomery and southern Alabama
Perryton Coca-Cola Bottling Company, Inc. -- March 2, 1999.
Operating in West Texas and Oklahoma
The total cost of all of the Company's acquisitions since reorganization in
1986 is approximately $13 billion, including assumed and issued debt where
applicable. The Company intends to acquire only bottling businesses offering the
Company the ability to produce long-term share-owner value.
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TERRITORIES
The Company's bottling territories in North America are located in 46
states of the United States, the District of Columbia, and all ten provinces of
Canada. At December 31, 1998, these territories contained approximately 216
million people, representing approximately 69% of the population of the United
States and 94% of the population of Canada.
(NORTH AMERICA MAP)
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The Company's bottling territories in Europe consist of Great Britain,
Belgium, Luxembourg, the Netherlands, and most of France. The aggregate
population of these territories was approximately 137 million people at December
31, 1998.
(EUROPEAN MAP)
PRODUCTS
Within its North American territories the Company markets, distributes, and
produces beverage products of The Coca-Cola Company or its subsidiaries; these
products include Coca-Cola classic, caffeine free Coca-Cola classic, diet Coke,
caffeine free diet Coke, Sprite, diet Sprite, Cherry Coke, diet Cherry Coke,
Barq's, Citra, Fanta, Fresca, Fruitopia, Hi-C fruit drinks, Mello Yello, Minute
Maid and diet Minute Maid soft drinks, Minute Maid juices, Mr. PiBB, POWERaDE,
SURGE, and TAB. Substantially all of the beverages bearing the trademark
"Coca-Cola" or "Coke" (the "Coca-Cola Trademark Beverages") are available
throughout the Company's North American territories.
Additionally, the Company markets, distributes, and produces (or obtains
from authorized producers) Nestea products, under license from Coca-Cola Nestle
Refreshments Company, USA, and various noncola beverage products under the
trademarks of companies other than The Coca-Cola Company. Other products
marketed and distributed by the Company in select North American markets
include: Canada Dry, Dr Pepper, Diet Dr Pepper, Evian, Mendota Springs, NAYA,
Nestea, Cool from Nestea, diet Nestea, Schweppes, Seagrams, and Squirt.
Major products of The Coca-Cola Company and other companies marketed and
distributed by the Company in its European territories include Aquarius, Buxton
Mineral Water, caffeine free Coca-Cola, caffeine free Coca-Cola light, Canada
Dry, Capri Sun, Cherry Coke, Coca-Cola, Coca-Cola light, caffeine free diet
Coke, diet Coke, Dr Pepper, Fanta, Five Alive, Kia-Ora, Lilt, Malvern Waters,
Minute Maid juices, Nestea, Oasis, Perrier Mineral Water, Schweppes, Sprite,
Sprite light, and Vittel Water.
The Coca-Cola Company and other companies manufacture syrups and
concentrates, and in some cases the finished product, for sale to bottlers and
(in some territories) to fountain wholesalers. The Company's bottling and
canning operations first combine the syrup or concentrate with sweetener and
carbonated water then package the finished product in authorized containers for
sale and direct store delivery to wholesalers and/or retailers, depending on the
territory. See "Marketing" and "Raw Materials" below.
Approximately 75% of the Company's North American equivalent case sales in
1998 (excluding post-mix) represented caloric products and the balance
represented low-calorie products. "Post-mix" (sometimes called fountain syrup)
is syrup which is mixed with water and
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carbon dioxide at the time it is being dispensed into open containers, such as
cups, for immediate consumption.
MARKETING
The Company sells its products in a variety of packages authorized by The
Coca-Cola Company and other companies. In 1998, domestic and international
equivalent case sales of the Company, excluding post-mix syrup sales, were
packaged approximately 48% in cans, 48% in other nonrefillable packaging, and 4%
in refillable and pre-mix containers. Post-mix syrup accounted for approximately
13% of the Company's equivalent case sales in 1998.
The Company relies extensively on advertising and sales promotions in the
marketing of its products. The Coca-Cola Company and the other beverage
companies that supply concentrates, syrups, and finished products to the Company
make substantial advertising expenditures in all major media to promote sales in
the local areas served by the Company. The Company also benefits from national
advertising programs conducted by The Coca-Cola Company and other beverage
companies. Certain of the marketing expenditures by The Coca-Cola Company and
other beverage companies are made pursuant to annual arrangements. Although The
Coca-Cola Company has advised the Company that it intends to continue to provide
marketing support in 1999, it is not obligated to do so under either the
domestic or international beverage agreements, except as otherwise specifically
committed and such support in 1999 might not be at the level provided in 1998.
See "North American Beverage Agreements" and "European Beverage Agreements"
below.
Sales of the Company's products are seasonal, with the second and third
calendar quarters accounting for higher sales volumes than the first and fourth
quarters. The bottling territories in Europe have more volatile sales volumes
because of the higher sensitivity of European consumption to weather conditions.
RAW MATERIALS
In addition to concentrates, sweeteners, and finished product, the Company
purchases carbon dioxide, glass and plastic bottles, cans, closures, post-mix
packaging (such as plastic bags in cardboard boxes), and other packaging
materials. The Company generally purchases its raw materials, other than
concentrates, syrups, and sweeteners, from multiple suppliers. The beverage
agreements with The Coca-Cola Company provide that, with respect to the products
of The Coca-Cola Company, all authorized containers, closures, cases, cartons,
and other packages and labels must be purchased from manufacturers approved by
The Coca-Cola Company.
High fructose corn syrup is the principal sweetener used by the Company in
the United States and Canada for beverage products, other than low-calorie
products, of The Coca-Cola Company, although sugar is being used as a sweetener
in Western Canada during 1999. The Company and The Coca-Cola Company have
entered into arrangements for the purchase by the Company from The Coca-Cola
Company of substantially all of the Company's 1998-2002 requirements for
sweeteners in the United States. See "Certain Relationships and Related
Transactions -- Agreements and Transactions with The Coca-Cola Company --
Sweetener Requirements Agreement" in the Company's 1999 Proxy Statement, which
information is incorporated by reference into Item 13 of this report. In Europe,
the principal sweetener is sugar from sugar beets, purchased from multiple
suppliers. The Company does not separately purchase low-calorie sweeteners
because sweeteners for low-calorie beverage products of The Coca-Cola Company
are contained in the syrup or concentrate purchased by the Company from The
Coca-Cola Company.
The Company currently purchases its requirements for plastic bottles in the
United States from manufacturers jointly owned by it and other Coca-Cola
bottlers. Management of the Company believes that ownership interests in certain
suppliers and the self-manufacture of
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certain packages serve to reduce or manage costs. In Canada, a merchant supplier
is used. In Europe, the Company produces most of its plastic bottle requirements
using preforms purchased from various merchant suppliers.
There are no materials or supplies used by the Company which are currently
in short supply, although the supply of specific materials could be adversely
affected by strikes, weather conditions, governmental controls, or national
emergencies.
NORTH AMERICAN BEVERAGE AGREEMENTS
Domestic Cola and Allied Beverage Agreements in the United States with The
Coca-Cola Company
The Company purchases concentrate and syrup from The Coca-Cola Company and
produces, markets, and distributes its principal liquid nonalcoholic refreshment
products within the United States under two basic forms of beverage agreements
with The Coca-Cola Company: beverage agreements that cover the Coca-Cola
Trademark Beverages (the "Cola Beverage Agreements") and beverage agreements
that cover other carbonated and some noncarbonated beverages of The Coca-Cola
Company (the "Allied Beverages" and "Allied Beverage Agreements") (referred to
collectively in this report as the "Domestic Cola and Allied Beverage
Agreements"). See "Introduction" and "Products" above. The Company and each of
its bottling company subsidiaries are parties to one or more separate Cola
Beverage Agreements and to various Allied Beverage Agreements. In this section,
unless the context indicates otherwise, a reference to the Company refers to the
legal entity in the United States that is a party to the beverage agreements
with The Coca-Cola Company.
Pricing. Pursuant to the Domestic Cola and Allied Beverage Agreements, The
Coca-Cola Company establishes the prices charged to the Company for concentrates
and syrups for Coca-Cola Trademark Beverages and Allied Beverages. The Company
expects that net prices charged by The Coca-Cola Company in 1999 for syrup and
concentrates will increase approximately 3.0% above 1998 prices. The Coca-Cola
Company has no rights under the Domestic Cola and Allied Beverage Agreements to
establish the resale prices at which the Company sells its products.
Cola Beverage Agreements in the United States with The Coca-Cola Company
Exclusivity. The Cola Beverage Agreements provide that the Company will
purchase its entire requirements of concentrates and syrups for Coca-Cola
Trademark Beverages from The Coca-Cola Company at prices, terms of payment, and
other terms and conditions of supply, as determined from time to time by The
Coca-Cola Company in its sole discretion. The Company has the exclusive right to
distribute Coca-Cola Trademark Beverages for sale in authorized containers
within its territories. The Coca-Cola Company may determine, from time to time
in its sole discretion, what types of containers to authorize for use with
products of The Coca-Cola Company.
Transshipping. The Company may not sell Coca-Cola Trademark Beverages
outside its territories.
Company Obligations. The Company is obligated to maintain such plant and
equipment, staff, and distribution and vending facilities as are capable of
manufacturing, packaging, and distributing Coca-Cola Trademark Beverages in
accordance with the Cola Beverage Agreements and in sufficient quantities to
satisfy fully the demand for these beverages in its territories; to undertake
adequate quality control measures prescribed by The Coca-Cola Company; to
develop and to stimulate the demand for Coca-Cola Trademark Beverages in those
territories; to use all approved means, and spend such funds on advertising and
other forms of marketing, as may be reasonably required to satisfy that
objective; and to maintain such sound financial capacity as may be reasonably
necessary to assure performance by the Company of its obligations to
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The Coca-Cola Company. The Company is required to meet annually with The
Coca-Cola Company to present its marketing, management, and advertising plans
with respect to the Coca-Cola Trademark Beverages for the year, including
financial plans showing that the Company has the consolidated financial capacity
to perform its duties and obligations to The Coca-Cola Company. The Coca-Cola
Company may not unreasonably withhold approval of such plans. If the Company
carries out its plans in all material respects, it will be deemed to have
satisfied its obligations to develop, stimulate, and satisfy fully the demand
for the Coca-Cola Trademark Beverages and to maintain the requisite financial
capacity. Failure to carry out such plans in all material respects would
constitute an event of default that, if not cured or waived by The Coca-Cola
Company within 120 days of notice of the failure, would give The Coca-Cola
Company the right to terminate the Cola Beverage Agreements. If the Company at
any time fails to carry out a plan in all material respects in any geographic
segment of its territory, and if such failure is not cured within six months
after notice of the failure, The Coca-Cola Company may reduce the territory
covered by that Cola Beverage Agreement by eliminating the portion of the
territory in which such failure has occurred.
Acquisition of Other Bottlers. If the Company acquires control, directly
or indirectly, of any bottler of Coca-Cola Trademark Beverages in the United
States, or any party controlling a bottler of Coca-Cola Trademark Beverages in
the United States, the Company must cause the acquired bottler to amend its
agreement for the Coca-Cola Trademark Beverages to conform to the terms of the
Cola Beverage Agreements described above.
Term and Termination. The domestic Cola Beverage Agreements are perpetual,
but they are subject to termination by The Coca-Cola Company upon the occurrence
of an event of default by the Company. Events of default with respect to each
Cola Beverage Agreement include: (i) production or sale of any cola product not
authorized by The Coca-Cola Company; (ii) insolvency, bankruptcy, dissolution,
receivership, or the like; (iii) any disposition by the Company of any voting
securities of any bottling company without the consent of The Coca-Cola Company;
and (iv) any material breach of any obligation of the Company under that Cola
Beverage Agreement that remains uncured for 120 days after notice by The
Coca-Cola Company. If any Cola Beverage Agreement is terminated because of an
event of default, The Coca-Cola Company has the right to terminate all other
Cola Beverage Agreements held by the Company.
In addition, each Cola Beverage Agreement held by the Company provides that
The Coca-Cola Company has the right to terminate that Cola Beverage Agreement if
a person or affiliated group (with specified exceptions) acquires or obtains any
contract, option, conversion privilege, or other right to acquire, directly or
indirectly, beneficial ownership of more than 10% of any class or series of
voting securities of the Company. However, The Coca-Cola Company has agreed with
the Company that this provision will not apply with respect to the ownership of
any class or series of voting securities of the Company, although it would apply
to the voting securities of each bottling company subsidiary.
The provisions of the Cola Beverage Agreements which make it an event of
default to dispose of any Cola Beverage Agreement or voting securities of any
bottling company subsidiary without the consent of The Coca-Cola Company and
which prohibit the assignment or transfer of the Cola Beverage Agreements are
designed to preclude any person not acceptable to The Coca-Cola Company from
obtaining an assignment of a Cola Beverage Agreement or from acquiring any
voting securities of the Company's bottling subsidiaries. These provisions
prevent the Company from selling or transferring any of its interest in any
bottling operations without the consent of The Coca-Cola Company. These
provisions may also make it impossible for the Company to benefit from certain
transactions, such as mergers or acquisitions, involving any of the bottling
operations that might be beneficial to the Company and its share owners but
which are not acceptable to The Coca-Cola Company.
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Allied Beverage Agreements in the United States with The Coca-Cola Company
The Allied Beverages are beverages of The Coca-Cola Company, its
subsidiaries, and joint ventures that are either carbonated beverages but not
Coca-Cola Trademark Beverages or are certain noncarbonated beverages, such as
Hi-C fruit drinks, cold-fill Fruitopia, and Cool from Nestea. The Allied
Beverage Agreements contain provisions that are similar to those of the Cola
Beverage Agreements with respect to pricing, transshipping, authorized
containers, planning, quality control, transfer restrictions, and related
matters but have certain significant differences from the Cola Beverage
Agreements.
Exclusivity. Under the Allied Beverage Agreements, the Company has
exclusive rights to distribute the Allied Beverages in authorized containers in
specified territories. Like the Cola Beverage Agreements, the Company has
advertising, marketing, and promotional obligations, but, for some brands,
without restriction as to the marketing of products with similar flavors as long
as there is no manufacturing or handling of other products that would imitate,
infringe upon, or cause confusion with, the products of The Coca-Cola Company.
The Coca-Cola Company has the right to discontinue any or all Allied Beverages,
and the Company has a right, but not an obligation, under each of the Allied
Beverage Agreements (except under the Allied Beverage Agreements for Hi-C fruit
drinks and carbonated Minute Maid beverages) to elect to market any new beverage
introduced by The Coca-Cola Company under the trademarks covered by the
respective Allied Beverage Agreements.
Term and Termination. Each Allied Beverage Agreement has a term of ten or
fifteen years and is renewable by the Company for an additional ten or fifteen
years at the end of each term. The initial term for many of the Company's Allied
Beverage Agreements expired in 1996 and substantially all were renewed. The
Company intends to renew substantially all the Allied Beverage Agreements as
they expire. The Allied Beverage Agreements are subject to termination in the
event of default by the Company. The Coca-Cola Company may terminate an Allied
Beverage Agreement in the event of: (i) insolvency, bankruptcy, dissolution,
receivership, or the like; (ii) termination of the Cola Beverage Agreement of
the Company by either party for any reason; or (iii) any material breach of any
obligation of the Company under the Allied Beverage Agreement that remains
uncured after required prior notice by The Coca-Cola Company.
Noncarbonated Beverage Agreements in the United States with The Coca-Cola
Company
The Company purchases certain noncarbonated beverages such as isotonics,
teas, and juice drinks in finished form from The Coca-Cola Company, or its
designees and joint ventures, pursuant to the terms of marketing and
distribution agreements (the "Noncarbonated Beverage Agreements"). The
Noncarbonated Beverage Agreements contain provisions that are similar to the
Domestic Cola and Allied Beverage Agreements with respect to authorized
containers, planning, quality control, transfer restrictions, and related
matters but have certain significant differences therefrom.
Exclusivity. Unlike the Cola Beverage Agreements, which grant the Company
exclusivity in the distribution of the covered beverages in the territory, the
Noncarbonated Beverage Agreements grant exclusivity but permit The Coca-Cola
Company to test market the noncarbonated beverage products in the territory,
subject to the Company's right of first refusal to do so, and to sell the
noncarbonated beverages to commissaries for delivery to retail outlets in the
territory where noncarbonated beverages are consumed on-premise, such as
restaurants. The Coca-Cola Company must pay the Company certain fees for lost
volume, delivery, and taxes in the event of such commissary sales. Also, under
the Noncarbonated Beverage Agreements, the Company may not sell other beverages
in the same product category.
Pricing. The Coca-Cola Company, in its sole discretion, establishes the
pricing the Company must pay for the noncarbonated beverages but has agreed,
under certain
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circumstances, to give the Company the benefit of more favorable pricing if such
pricing offered to other Coca-Cola bottlers.
Term. Each of the Noncarbonated Beverage Agreements has a term of ten
years and is renewable by the Company for an additional ten years at the end of
each term. The initial term for most of the Noncarbonated Beverage Agreements
for POWERaDE will expire in 2004, and for Nestea and Minute Maid juices and
juice drinks will expire in 2007.
Marketing and Other Support in the United States from The Coca-Cola Company
The Coca-Cola Company has no obligation under the Domestic Cola and Allied
Beverage Agreements and Noncarbonated Beverage Agreements to participate with
the Company in expenditures for advertising, marketing and other support, but it
may, in its discretion, contribute to such expenditures and undertake
independent advertising and marketing activities, as well as cooperative
advertising and sales promotion programs, that would require the cooperation and
support of the Company. The Coca-Cola Company has provided support in 1998 but
is under no obligation to continue past levels of funding, and 1999 funding
could be less than that provided in 1998.
Post-Mix Sales and Marketing Agreements in the United States with The Coca-Cola
Company
In the past the Company has sold and delivered the post-mix products of The
Coca-Cola Company pursuant to one-year post-mix distributorship appointments; in
1998, the Company signed a five-year distributorship appointment ending on
December 31, 2002. The appointment is terminable by either party without cause
upon ten days' written notice. In 1998, the Company sold and/or delivered such
post-mix products in all of its major territories in the United States. Under
the terms of the appointment, the Company is authorized to distribute such
syrups to retailers for dispensing to consumers within the United States. Unlike
the Domestic Cola and Allied Beverage Agreements, there is no exclusive
territory, and the Company faces competition not only from sellers of other
post-mix syrups but from other sellers of post-mix syrups of The Coca-Cola
Company (including The Coca-Cola Company). Depending on the territory, the
Company is involved in the sale, distribution, and marketing of post-mix syrups
in differing degrees. In some territories, the Company sells syrup on its own
behalf, but the primary responsibility for marketing lies with The Coca-Cola
Company. In other territories, the Company is responsible for marketing post-mix
syrup to certain segments of the business. See "Certain Relationships and
Related Transactions -- Agreements and Transactions with The Coca-Cola
Company -- Sales of Syrups, Bottle and Can Products and Agency Billing and
Delivery Arrangements" in the Company's 1999 Proxy Statement; this information
is incorporated by reference into Item 13 of this report.
Beverage Agreements in the United States with Other Licensors
The beverage agreements in the United States between the Company and other
licensors of beverage products and syrups contain restrictions generally similar
in effect to those in the Domestic Cola and Allied Beverage Agreements as to
trade names, approved bottles, cans and labels, sale of imitations, and causes
for termination. Those agreements generally give those licensors the unilateral
right to change the prices for their products and syrups at any time in their
sole discretion. Some of these beverage agreements have limited terms of
appointment and, in most instances, prohibit the Company from dealing in
products with similar flavors in certain territories. The agreements with
subsidiaries of Cadbury Schweppes plc, which represented in 1998 approximately
7% of the beverages sold by the Company in the United States and the Caribbean,
provide that the parties will give each other at least one year's notice prior
to terminating the agreement for any brand, and pay certain fees in some
circumstances. Also, the Company agreed that it would not cease distributing Dr
Pepper brand products prior to December 31, 2005 or Canada Dry, Schweppes, or
Squirt brand products prior to December 31,
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<PAGE> 12
2001. The termination provisions for Dr Pepper renew for five-year periods;
those for the other Cadbury brands renew for three-year periods.
Canadian Beverage Agreements with The Coca-Cola Company
Coca-Cola Bottling Ltd., the Company's bottler in Canada, sells,
distributes, and produces Coca-Cola Trademark Beverages, Allied Beverages, and
noncarbonated beverages of The Coca-Cola Company and Coca-Cola Ltd., an
affiliate of The Coca-Cola Company ("Coca-Cola Beverage Products") in its
territories pursuant to license agreements and arrangements with Coca-Cola Ltd.,
and in certain cases, with The Coca-Cola Company ("Canadian Beverage
Agreements"). The Canadian Beverage Agreements are similar to the Domestic Cola
and Allied Beverage Agreements with respect to authorized containers, planning,
quality control, transshipping, transfer restrictions, termination, and related
matters but have certain significant differences therefrom.
Exclusivity. The Canadian Beverage Agreement for Coca-Cola Trademark
Beverages gives Coca-Cola Bottling Ltd. the exclusive right to distribute
Coca-Cola Trademark Beverages in its territories in bottles authorized by
Coca-Cola Ltd. Coca-Cola Bottling Ltd. also is authorized on a nonexclusive
basis to sell, distribute, and produce canned, pre-mix and post-mix Coca-Cola
Trademark Beverages in such territories. At present, there are no other
authorized producers or distributors of canned, pre-mix, or post-mix Coca-Cola
Trademark Beverages in Coca-Cola Bottling Ltd.'s territories, and Coca-Cola
Bottling Ltd. has been advised by Coca-Cola Ltd. that there are no present
intentions to authorize any such producers or distributors in the future. In
general, the Canadian Beverage Agreement for Coca-Cola Trademark Beverages
prohibits Coca-Cola Bottling Ltd. from producing or distributing beverages other
than the Coca-Cola Trademark Beverages unless Coca-Cola Ltd. has given Coca-Cola
Bottling Ltd. notice that it approves the production and distribution of such
beverages.
Pricing. An affiliate of The Coca-Cola Company supplies the concentrates
for the Coca-Cola Trademark Beverages and may establish and revise at any time
the price of concentrates, the payment terms, and the other terms and conditions
under which Coca-Cola Bottling Ltd. purchases concentrates for the Coca-Cola
Trademark Beverages. The Company expects that net prices charged in 1999 for
concentrates will increase approximately 3.0% above 1998 prices. Unlike other
beverage agreements in other parts of the world, Coca-Cola Ltd. may, in its sole
discretion, establish maximum prices at which the Coca-Cola Trademark Beverages
may be sold by Coca-Cola Bottling Ltd. to its retailers. Coca-Cola Ltd. may also
establish maximum retail prices for such beverages, and Coca-Cola Bottling Ltd.
is required to use its best efforts to maintain such maximum retail prices.
Coca-Cola Bottling Ltd. may not require a deposit on any container used by it
for the sale of the Coca-Cola Trademark Beverages unless it is required by law
or approved by Coca-Cola Ltd. and, if a deposit is required, such deposit may
not exceed the greater of the minimum deposit required by law or the deposit
approved by Coca-Cola Ltd.
Term. The Canadian Beverage Agreements for Coca-Cola Trademark Beverages
expire on July 28, 2007, with provisions to renew for two additional terms of
ten years each, provided generally that Coca-Cola Bottling Ltd. has complied
with and continues to be capable of complying with their provisions. Coca-Cola
Bottling Ltd.'s authorizations to sell, distribute, and produce pre-mix and
post-mix Coca-Cola Trademark Beverages may be terminated by either party on
ninety days' notice.
Marketing and Other Support. Coca-Cola Ltd. has no obligation under the
Canadian Beverage Agreements to participate with Coca-Cola Bottling Ltd. in
expenditures for advertising, marketing and other support. However, it may, in
its discretion, contribute to such expenditures and undertake independent
advertising and marketing activities, as well as cooperative advertising and
sales promotion programs, that would require the cooperation and support of the
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<PAGE> 13
Company. Coca-Cola Ltd. has provided support in 1998 but is under no obligation
to continue past levels of funding, and 1999 funding could be less than provided
in 1998.
Other Coca-Cola Beverage Products. The license agreements and arrangements
of Coca-Cola Bottling Ltd. with Coca-Cola Ltd., and in certain cases, with The
Coca-Cola Company, for the Coca-Cola Beverage Products other than Coca-Cola
Trademark Beverages are on terms generally similar to those contained in the
license agreement for the Coca-Cola Trademark Beverages.
Beverage Agreements in Canada with Other Licensors
Coca-Cola Bottling Ltd. has several license agreements and arrangements
with other licensors, including license agreements with subsidiaries of Cadbury
Schweppes plc having terms expiring in July 2002 and December 2036, each being
renewable for successive five-year terms until terminated by either party. These
beverage agreements generally give Coca-Cola Bottling Ltd. the exclusive right
to produce and distribute authorized beverages in authorized packaging in
specified territories. These beverage agreements also generally provide flexible
pricing for the licensors, and in many instances, prohibit Coca-Cola Bottling
Ltd. from dealing in beverages confusing with, or imitative of, the authorized
beverages. These agreements contain restrictions generally similar to those in
the Canadian Beverage Agreements regarding the use of trademarks, approved
bottles, cans and labels, sales of imitations, and causes for termination. On
December 11, 1998, The Coca-Cola Company announced that it was buying the
beverage brands of Cadbury Schweppes plc in various countries, including Canada.
This transaction is subject to regulatory review in a number of countries and
certain other approvals; it is expected to be closed in mid-1999.
EUROPEAN BEVERAGE AGREEMENTS
European Beverage Agreements with The Coca-Cola Company
The Company's bottlers in the Netherlands, Belgium, and France
(collectively the "Company Continental Bottlers") and the Company's bottlers in
Great Britain and Luxembourg (which together with the Company Continental
Bottlers are collectively called the "Company European Bottlers"), operate in
their respective territories under agreements with The Coca-Cola Company and The
Coca-Cola Export Corporation, dated July 26, 1996 for the Company Continental
Bottlers, February 10, 1997 for the British bottler, and January 30, 1998 for
the Luxembourg bottler (the "European Beverage Agreements"); these agreements
have certain significant differences from the beverage agreements described
above. The Company believes that the European Beverage Agreements are
substantially similar to other agreements between The Coca-Cola Company and
other European bottlers of Coca-Cola Trademark Beverages and Allied Beverages.
Exclusivity. Subject to the European Supplemental Agreement, described
below in this report, and certain minor exceptions, the Company European
Bottlers have the exclusive rights granted by The Coca-Cola Company in their
territories to sell the beverages covered by their respective European Beverage
Agreements in glass bottles, plastic bottles, and/or cans. The covered beverages
include Coca-Cola Trademark Beverages, Allied Beverages, noncarbonated
beverages, and certain beverages not sold in the United States. See "Products"
above. The Coca-Cola Company has retained the rights, under certain
circumstances, to produce and sell, or authorize third parties to produce and
sell, the beverages in any other manner or form within the territories. The
Coca-Cola Company has further granted certain Company European Bottlers a
nonexclusive authorization to package and sell post-mix and/or pre-mix beverages
in their territories.
Transshipping. The Company European Bottlers are prohibited from making
sales of the beverages outside of their territories, or to anyone intending to
resell the beverages outside their
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<PAGE> 14
territories, without the consent of The Coca-Cola Company, except for sales
arising out of an order from a customer in another member state of the European
Union or for export to another such member state. The European Beverage
Agreements also contemplate that there may be instances in which large or
special buyers have operations transcending the boundaries of the territories,
and in furtherance of this, the Company European Bottlers and The Coca-Cola
Company are cooperating in sales to such buyers.
Pricing. The European Beverage Agreements provide that the sales of
beverage base and other goods to the Company European Bottlers are at prices
which are set from time to time by The Coca-Cola Company. The Company expects
that net prices charged in 1999 by The Coca-Cola Company for syrup, concentrate,
and other goods will increase approximately 4.3% over 1998 prices.
Term and Termination. The European Beverage Agreements expire July 26,
2006 for the Company Continental Bottlers, February 10, 2007 for the British
bottler, and January 30, 2008 for the Luxembourg bottler, unless terminated
earlier as provided therein. If the European Bottlers have fully complied with
the agreements during the initial term, are "capable of the continued promotion,
development, and exploitation of the full potential of the business", and
request an extension of the agreement, an additional ten-year term may be
granted at the sole discretion of The Coca-Cola Company. The Coca-Cola Company
is given the right to terminate the European Beverage Agreements before the
expiration of the stated term upon the insolvency, bankruptcy, nationalization,
or similar condition of the Company European Bottlers or the occurrence of a
default under the European Beverage Agreements which is not remedied within 60
days of notice of the default being given by The Coca-Cola Company. The European
Beverage Agreements may be terminated by either party in the event foreign
exchange is unavailable or local laws prevent performance. The post-mix and
pre-mix authorizations are terminable by either party with 90 days' prior
notice.
European Supplemental Agreement with The Coca-Cola Company
In addition to the European Beverage Agreements described above, the
Company European Bottlers, The Coca-Cola Company, and The Coca-Cola Export
Corporation are parties to a supplemental agreement (the "European Supplemental
Agreement") with regard to the Company European Bottlers' rights pursuant to the
European Beverage Agreements. The European Supplemental Agreement permits the
Company European Bottlers to prepare, package, distribute, and sell the
beverages covered by any of the Company European Bottlers' European Beverage
Agreements in any other territory of another Company European Bottler, provided
that the Company and The Coca-Cola Company shall have reached agreement upon a
business plan for such beverages. The European Supplemental Agreement may be
terminated, either in whole or in part by territory, by The Coca-Cola Company at
any time with 90 days' prior written notice.
Marketing and Other Support in Europe from The Coca-Cola Company
The Coca-Cola Company has no obligation under the European Beverage
Agreements to participate with the Company in expenditures for advertising,
marketing and other support, but it may, in its discretion, contribute to such
expenditures and undertake independent advertising and marketing activities, as
well as cooperative advertising and sales promotion programs, that would require
the cooperation and support of the Company. The Coca-Cola Company has provided
support in 1998 but is under no obligation to continue past levels of funding,
and 1999 funding could be less than that provided in 1998.
Beverage Agreements in Europe with Other Licensors
The beverage agreements between the Company and other licensors of beverage
products and syrups generally give those licensors the unilateral right to
change the prices for their
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<PAGE> 15
products and syrups at any time in their sole discretion. Some of these beverage
agreements have limited terms of appointment and, in most instances, prohibit
the Company from dealing in products with similar flavors. Those agreements
contain restrictions generally similar in effect to those in the European
Beverage Agreements as to trade names, approved bottles, cans and labels, sale
of imitations, planning, and causes for termination. As a condition to Cadbury
Schweppes plc's sale of its 51% interest in the British bottler to the Company
in February 1997, the Company entered into agreements concerning certain aspects
of the Cadbury Schweppes products distributed by the British bottler. These
agreements impose obligations upon the Company with respect to the marketing,
sale, and distribution of Cadbury Schweppes products within the British
bottler's territory. These agreements further require the British bottler to
achieve certain agreed growth rates for Cadbury Schweppes brands and grant
certain rights and remedies to Cadbury Schweppes if these rates are not met.
These agreements also place some limitations upon the British bottler's ability
to discontinue Cadbury Schweppes brands, and recognize the exclusivity of
certain Cadbury Schweppes brands in their respective flavor categories. The
British bottler is given the first right to any new Cadbury Schweppes brands
introduced in the territory. These agreements run through 2012 and are
automatically renewed for a ten-year term thereafter unless terminated by either
party. On December 11, 1998, The Coca-Cola Company announced that it was buying
beverage brands of Cadbury Schweppes plc in various countries, including all
countries in which the Company European Bottlers operate except for France. This
transaction is subject to regulatory review in a number of countries and certain
other approvals; it is expected to be closed in mid-1999.
COMPETITION
The liquid nonalcoholic refreshment business is highly competitive.
Competition exists among all beverages, including soft drinks, isotonics, tea,
tea drinks, juices, juice drinks, coffee, coffee drinks, water, beer, wine, wine
coolers, milk and milk drinks, and bottled waters. Competitors in this business
include bottlers and distributors of beverages marketed and advertised at
international, national, regional, and local levels, as well as chain store and
private label beverages. Information on sales in the liquid nonalcoholic
refreshment business is not readily available.
Brand recognition and pricing are significant factors affecting the
Company's competitive position, but the consumer and customer goodwill
associated with the trademarks of its products is the most favorable factor for
the Company. Other competitive factors among beverage distributors include
marketing, distribution methods, service to the trade, and the management of
sales promotion activities. Vending machine sales, packaging changes, and
relationships with fountain customers are also competitive factors. The
introductions of new products and packages have been major competitive elements
in the liquid nonalcoholic refreshment industry.
EMPLOYEES
At January 31, 1999, the Company had approximately 66,000 employees,
approximately 9,000 of whom were in Europe. The Company is a party to 151
collective bargaining agreements covering approximately 15,300 of its North
American employees. These collective bargaining agreements expire at various
dates through 2004. The Company has no reason to believe that it will be unable
to renegotiate any of these agreements on satisfactory terms. Management of the
Company believes that the Company's relations with its employees are generally
good.
GOVERNMENTAL REGULATION
Packaging
Anti-litter measures have been enacted in the United States in California,
Connecticut, Delaware, Iowa, Maine, Massachusetts, Michigan, New York, Oregon,
Vermont, and the City of
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Columbia, Missouri, some of which prohibit the sale of certain beverages,
whether in refillable or nonrefillable containers, unless a deposit is charged
by the retailer for the container. The retailer or redemption center refunds all
or some of the deposit to the customer upon the return of the container. The
containers are then returned to the bottler, which, in most jurisdictions, must
pay the refund and, in certain others, must also pay a handling fee. In
California, a levy is imposed on beverage containers to fund a waste recovery
system. In the past, similar legislation has been proposed but not adopted
elsewhere, although the Company anticipates that additional jurisdictions may
enact such laws. Massachusetts requires the creation of a deposit transaction
fund by bottlers and the payment to the state of balances in that fund that
exceed three months of deposits received, net of deposits repaid to customers
and interest earned. Michigan also has a statute requiring bottlers to pay to
the state unclaimed container deposits.
In Canada, soft drink containers are subject to waste management measures
in each of the ten provinces. Seven provinces have forced deposit schemes, of
which three have half-back deposit systems whereby a deposit is collected from
the consumer and one-half of the deposit amount is returned upon redemption. In
Manitoba a levy is imposed on beverage containers to fund a multi-material
recovery system. Prince Edward Island requires all soft drink beverages to be
sold in refillable containers. Regulations in Ontario, which are currently not
being enforced by the government, require that sales by a bottler of soft drink
beverages in refillable containers must meet a minimum percentage of total sales
of soft drink beverages by such bottler in refillable and nonrefillable
containers within that bottler's sales areas. It is acknowledged that there is
widespread industry noncompliance with such regulations.
The European Commission has issued a packaging and packing waste directive
which is in the process of being incorporated into the national legislation of
the member states. This will result in targets being set for the recovery and
recycling of household, commercial, and industrial packaging waste and impose
substantial responsibilities upon bottlers and retailers for implementation.
The Company has taken actions to mitigate the adverse effects resulting
from legislation concerning deposits, restrictive packaging, and escheat of
unclaimed deposits which impose additional costs on the Company. The Company is
unable to quantify the impact on current and future operations which may result
from such legislation if enacted or enforced in the future, but the impact of
any such legislation could be significant if widely enacted or enforced.
Excise and Value Added Taxes
Excise taxes on sales of soft drinks have been in place in various states
in the United States for several years. The states in which the Company operates
that currently impose such taxes are Arkansas, North Carolina, Tennessee,
Washington, and West Virginia. In addition, the state of Hawaii has imposed a
special tax on glass containers. To the knowledge of management of the Company,
no similar legislation has been enacted in any other markets served by the
Company. Proposals have been introduced in certain states and localities that
would impose a special tax on beverages sold in nonrefillable containers as a
means of encouraging the use of refillable containers. However, the Company's
management is unable to predict whether such additional legislation will be
adopted.
Value added tax on soft drinks ranges from 3% to 21% within the Company's
bottling territories in Canada and the European Community. In addition, excise
taxes on sales of soft drinks are in place in Belgium, France, and the
Netherlands. The existence and level of this indirect taxation on the sale of
soft drinks is now a matter of legal and public debate given the need for
further tax harmonization within the European Community.
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California Legislation
A California law requires that any person who exposes another to a
carcinogen or a reproductive toxicant must provide a warning to that effect.
Because the law does not define quantitative thresholds below which a warning is
not required, virtually all manufacturers of food products are confronted with
the possibility of having to provide warnings due to the presence of trace
amounts of defined substances. Regulations implementing the law exempt
manufacturers from providing the required warning if it can be demonstrated that
the defined substances occur naturally in the product or are present in
municipal water used to manufacture the product. The Company has assessed the
impact of the law and its implementing regulations on the Company's beverage
products and has concluded that none of the Company's products currently
requires a warning under the law. The Company cannot predict whether or to what
extent food industry efforts to minimize the law's impact on food products will
succeed, nor can the Company predict what impact, either in terms of direct
costs or diminished sales, that imposition of the law may have.
Underground Storage Tanks and Other Environmental Regulations
Substantially all of the facilities of the Company are subject to laws and
regulations dealing with above-ground and underground fuel storage tanks and the
discharge of materials into the environment. Compliance with these provisions
has not had, and the Company does not expect such compliance to have, any
material effect upon the capital expenditures, net income, financial condition,
or competitive position of the Company. The Company's beverage manufacturing
operations do not use or generate a significant amount of toxic or hazardous
substances. Management believes that its current practices and procedures for
the control and disposition of such wastes comply with applicable law. In the
United States, the Company has been named as a potentially responsible party in
connection with certain landfill sites where the Company may have been a de
minimis contributor. Under current law, the Company's liability for cleanup
costs may be joint and several with other users of such sites, regardless of the
extent of the Company's use in relation to other users. However, in the opinion
of management of the Company, the potential liability of the Company in
connection with such activity is not significant and will not have a materially
adverse effect on the financial condition or results of operations of the
Company.
Several underground fuel storage tanks used by the Company may be found to
be in noncompliance with applicable federal and state requirements for the
continued maintenance and use of such tanks. The Company has adopted a plan for
the testing, removal, replacement, and repair, if necessary, of underground fuel
storage tanks at Company bottlers in North America; this includes any necessary
remediation of tank sites and the abatement of the discharge of pollutants. The
Company's plan extends to the upgrade of wastewater handling facilities, and the
remediation of friable asbestos. The Company spent approximately $6 million in
1998 pursuant to this plan, and the Company estimates it will spend
approximately $11 million in 1999 and $9.8 million in 2000 pursuant to this
plan. In the opinion of management of the Company, any liabilities associated
with the items covered by such plan will not have a materially adverse effect on
the financial condition or results of operations of the Company.
Trade Regulation
The business of the Company, as the exclusive manufacturer and distributor
of bottled and canned beverage products of The Coca-Cola Company and other
manufacturers within specified geographic territories, is subject to antitrust
laws of general applicability. Under the United States' Soft Drink Interbrand
Competition Act, the exercise and enforcement of an exclusive contractual right
to manufacture, distribute, and sell a soft drink product in a geographic
territory is presumptively lawful if the soft drink product is in substantial
and effective interbrand competition with other products of the same class in
the market. Management of the Company
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<PAGE> 18
believes that there is such substantial and effective competition in each of the
exclusive geographic territories in the United States in which the Company
operates.
The Treaty of Rome, which established the European Community, precludes
restrictions of the free movement of goods within the member states. As a
result, unlike the Company's Domestic Cola and Allied Beverage Agreements, the
European Beverage Agreements grant exclusive bottling territories to the Company
subject to the exception that other European Union and/or European Economic Area
suppliers of the beverages produced by the Company can, in response to
unsolicited orders, sell such products in the Company's European Community
territories. See "European Beverage Agreements."
Miscellaneous Regulations
The production, distribution, and sale of many of the Company's products
are subject to the Federal Food, Drug, and Cosmetic Act; the Occupational Safety
and Health Act; the Lanham Act; various federal, state, provincial, and local
environmental statutes and regulations; and various other federal, state,
provincial, and local statutes in the United States, Canada, and Europe
regulating the production, packaging, sale, safety, advertising, labeling, and
ingredients of such products.
FINANCIAL INFORMATION ON INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
For financial information on industry segments and operations in geographic
areas, see Note 16 to the Company's Consolidated Financial Statements, found on
page 43 of the Company's Annual Report to Share Owners for the year ended
December 31, 1998, which is incorporated into this report by reference.
ITEM 2. PROPERTIES
The principal properties of the Company include the executive offices,
production facilities, distribution facilities, administrative offices, and
service centers. At January 31, 1999, the Company operated 74 beverage
production facilities, 27 of which are solely production facilities and 47 of
which are combination production/distribution facilities, and also operated 370
principal distribution facilities. The Company owns 70 of its production
facilities and 281 of its principal distribution facilities, and leases the
others. In the aggregate, the Company's owned and leased facilities cover
approximately 39 million square feet. Management of the Company believes that
its production and distribution facilities are generally sufficient to meet
present operating needs.
One of the facilities owned by the Company is subject to a lien to secure
indebtedness in an aggregate principal amount of approximately $2 million at
December 31, 1998. Excluding expenditures for bottler acquisitions, the
Company's capital expenditures in 1998 were approximately $1.6 billion.
At January 31, 1999, the Company owned and operated approximately 47,000
vehicles of all types used in the sale, production, and distribution of its
products and over 1.9 million coolers, beverage dispensers, and vending
machines.
ITEM 3. LEGAL PROCEEDINGS
The Company and several of its bottling subsidiaries or divisions in the
United States have been named as potentially responsible parties ("PRPs") at
several federal and state "Superfund" sites. In 1987, BCI Coca-Cola Bottling
Company of Los Angeles ("CCBCLA") was named by the Environmental Protection
Agency ("EPA") as a PRP at the Operating Industries, Inc. ("OII") site at
Monterey Park, California. As of 1991, CCBCLA had contributed approximately
$300,000 toward the remediation efforts. After 1991, CCBCLA had no further
communications from the EPA until October 1997 when CCBCLA received notice from
the EPA
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that a "Final Remedy" for the site had been chosen with an estimated cost (in
addition to what had already been spent) of approximately $217 million
(including an estimated $52 million for EPA's past and future oversight costs),
and which is expected to take 30 years to complete. There are approximately 280
PRPs at this site. CCBCLA's monetary participation in prior remediation
activities at the OII site was based upon its allocated percentage of volume of
waste contributed to the site, which was 0.075%. Based upon this percentage and
the estimated costs, CCBCLA's share of the Final Remedy would be about $162,750.
In 1992, Florida Coca-Cola Bottling Company ("Florida CCBC") was named as a PRP
at the Peak Oil site in Tampa, Florida, formerly the location of a refiner of
used motor oil. Following an internal investigation and lengthy negotiations
with the PRP Group, Florida CCBC agreed to accept liability for approximately
32,000 gallons of used oil, representing approximately 1.6% of the total amount.
With total remediation costs estimated at up to $18 million, Florida CCBC's
ultimate liability could reach $300,000. In 1992, The Coca-Cola Bottling Company
of Memphis, Tenn. ("CCBC Memphis") was named as a PRP with respect to the South
8th Street landfill site (a/k/a West Memphis landfill) in West Memphis,
Arkansas, which is alleged to have been used in the 1950s and 1960s as a dump
site for the by-products from the reprocessing of used motor oil. Total cleanup
for the site has been estimated at up to $45 million. CCBC Memphis conducted an
internal investigation of this matter and determined that some of its waste oil
may have been taken to the South 8th Street landfill. However, neither the
specific volume of waste oil that may have been generated by CCBC Memphis, nor
its percentage of the whole relative to other PRPs has yet been determined.
Accordingly, CCBC Memphis cannot yet estimate the amount of its ultimate
liability. In 1994, the Company was named as a PRP at the Waste Disposal
Engineering site in Andover, Minnesota, a former landfill. The claim against the
Company is approximately $110,000; however, if this site is a "qualified
landfill" under Minnesota law, the entire cost of remediation may be paid by the
state without contribution from any PRP. In 1994, Florida CCBC was named as a
PRP at the Petroleum Products Corporation site in Pembroke Park, Florida, the
former location of a used oil recycling facility. Total cleanup for the site has
been estimated at up to $100 million. Florida CCBC conducted an internal
investigation of this matter and determined that some of its waste oil may have
been taken to the site. However, neither the specific volume of waste oil that
may have been generated by Florida CCBC, nor its percentage of the whole
relative to other PRPs, has yet been determined. Accordingly, Florida CCBC
cannot yet estimate the amount of its ultimate liability. In August 1998, CCBC
Memphis received notice from the EPA naming it as a PRP at the Gurley Pit
Superfund Site in Edmondson, 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. The
Company or its bottling subsidiaries have been named as PRPs at eighteen other
federal and seven other state "Superfund" sites under circumstances which have
led the management of the Company to conclude either (i) that the Company will
have no further liability because there was no responsibility for having
deposited hazardous waste; (ii) that payments made to date would be sufficient
to satisfy all liability; or (iii) that the Company's ultimate liability, if
any, for such site would be less than $100,000.
There are various other lawsuits and claims pending against the Company.
Included among such litigation are claims for injury to persons or property.
Management of the Company believes that such claims are covered by insurance
with financially responsible carriers or adequate provisions for losses have
been recognized by the Company in its consolidated financial statements. In the
opinion of management of the Company, the losses that might result from such
litigation will not have a materially adverse effect on the financial condition
or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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ITEM 4(A). EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is information as of March 15, 1999 regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AGE THE PAST FIVE YEARS
- ---- --- ---------------------------
<S> <C> <C>
Summerfield K. Johnston, Jr............ 66 Mr. Johnston has been Chairman of the Board of
Directors since October 1997. He was Vice Chairman
of the Board from December 1991 to October 1997, and
Chief Executive Officer from December 1991 until
April 1998.
Henry A. Schimberg..................... 66 Mr. Schimberg has been President and a director of
the Company since December 1991. He served as Chief
Operating Officer from December 1991 until April
1998, when he became Chief Executive Officer.
John R. Alm............................ 53 Mr. Alm has been Executive Vice President and Chief
Financial Officer since October 1997. He was Senior
Vice President and Chief Financial Officer of the
Company from December 1991 to October 1997.
Margaret F. Carton..................... 41 Ms. Carton has been Vice President, Investor
Relations and Planning since October 1996. She
served as Director, Investor Relations from 1990 to
October 1996.
Michael P. Coghlan..................... 43 Mr. Coghlan has been Vice President, Controller and
Principal Accounting Officer of the Company since
December 1998. He had been Chief Financial Officer
of the Company's Eastern Group since October 1996.
Prior to that, he had served as the Company's Vice
President and Director of Internal Audit (January
1996 until October 1996) and a Region Vice President
of Finance (June 1992 until December 1995).
John H. Downs, Jr...................... 42 Mr. Downs has been Vice President, Public Affairs of
the Company since 1989.
Norman P. Findley III.................. 54 Mr. Findley has been Senior Vice President of the
Company since December 1995 and European Group
President since July 1996. He was Vice President,
Domestic and International Marketing from July 1993
to December 1995. From 1989 to July 1993 he served
as Vice President, Marketing of the Company.
Summerfield K. Johnston III............ 45 Mr. Johnston has been Senior Vice President of the
Company since December 1995 and Eastern North
America Group President since July 1996. He was Vice
President, Regional Operations from July 1993 to
December 1995. He was Vice President and General
Manager, West Central Region from December 1992 to
July 1993. He served as Vice President, Human
Resources of the Company from February 1992 to
December 1992.
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AGE THE PAST FIVE YEARS
- ---- --- ---------------------------
<S> <C> <C>
Lowry F. Kline......................... 58 Mr. Kline has been Executive Vice President and
General Counsel since October 1997. He was Senior
Vice President and General Counsel from February
1996 to October 1997, and General Counsel of the
Company since December 1991. He was a partner in the
law firm of Miller & Martin LLP, Chattanooga,
Tennessee, from 1970 until 1996.
Patrick J. Mannelly.................... 44 Mr. Mannelly has been Vice President, Finance and
Administration, since December 1998. He was a Group
Vice President and General Manager in the Company's
Eastern North America Group, responsible for New
York and New England, from August 1997 until
December 1998; and in the Western North America
Group, responsible for Southern California from July
1996 until August 1997. Prior to that, from April
1993 to July 1996, he was Vice President and General
Manager for the Los Angeles division of the Western
North America Group.
Vicki R. Palmer........................ 45 Ms. Palmer has been Vice President and Treasurer of
the Company since December 1993. She was Treasurer
of the Company from February 1992 to December 1993.
Gary P. Schroeder...................... 54 Mr. Schroeder has been Senior Vice President of the
Company and Western North America Group President
since July 1996. He was Vice President, Regional
Operations of the Company from December 1994 to July
1996. He was Regional Vice President, General
Manager of the Southwest Region from January 1992 to
December 1994.
G. David Van Houten, Jr................ 49 Mr. Van Houten has been Senior Vice President of the
Company since December 1995 and Central North
America Group President since July 1996. He was Vice
President, Regional Operations of the Company from
July 1993 to December 1995 and he was Regional Vice
President and General Manager, Texas Region from
1992 to 1993.
</TABLE>
Summerfield K. Johnston, Jr. is the father of Summerfield K. Johnston III.
The officers of the Company are elected annually by the Board of Directors for
terms of one year or until their successors are elected and qualified, subject
to removal by the Board of Directors at any time.
19
<PAGE> 22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
LISTED AND TRADED: New York Stock Exchange
TRADED: Boston, Chicago, Cincinnati,
Pacific, and Philadelphia Exchanges
Common stock owners of record as of February 26, 1999: 16,629
STOCK PRICES*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
1998 HIGH LOW
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fourth Quarter 41 3/16 22 7/8
Third Quarter 41 9/16 22 15/16
Second Quarter 41 7/16 35 9/16
First Quarter 37 13/16 31 1/4
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
1997 HIGH LOW
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fourth Quarter 36 25 1/2
Third Quarter 31 5/8 22 1/4
Second Quarter 23 5/8 18 1/32
First Quarter 22 15 23/32
- ---------------------------------------------------------------------------------------
</TABLE>
* The Company's common stock split 3-for-1 during the second quarter of 1997.
All prior stock prices have been split-adjusted.
DIVIDENDS
Regular quarterly dividends in the amount of $0.04 per share have been paid
since July 1, 1998. Before that date, the regular quarterly dividend rate was
$0.025 per share for the first two quarters of 1998, and for the four quarters
of 1997.
ITEM 6. SELECTED FINANCIAL DATA
"Selected Financial Data" for the years 1989 through 1998, on pages 46 and
47 of the Company's Annual Report to Share Owners for the year ended December
31, 1998 is incorporated into this report by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Financial Review" on pages 18 through 29 of the Company's
Annual Report to Share Owners for the year ended December 31, 1998 is
incorporated into this report by reference.
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
"Management's Financial Review -- Interest Rate and Currency Risk
Management" on pages 24 and 27 of the Company's Annual Report to Share Owners
for the year ended December 31, 1998 is incorporated into this report by
reference.
20
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and its
subsidiaries are incorporated into this report by reference to the Company's
Annual Report to Share Owners for the year ended December 31, 1998, at the pages
indicated:
Consolidated Statements of Income -- Years ended December 31, 1998,
1997, and 1996 (page 21)
Consolidated Statements of Cash Flows -- Years ended December 31,
1998, 1997, and 1996 (page 23)
Consolidated Balance Sheets -- December 31, 1998 and 1997 (page 25)
Consolidated Statements of Share-Owners' Equity -- Years ended
December 31, 1998, 1997, and 1996 (page 26)
Notes to Consolidated Financial Statements (pages 30-44)
"Quarterly Financial Information" on page 44 of the Company's Annual
Report to Share Owners is incorporated into this report by reference.
Report of Independent Auditors (page 45)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors of the Company is set forth under the
caption "Election of Directors -- Information Concerning Directors" on pages 5
through 9 of the Company's 1999 Proxy Statement. Such information is
incorporated into this report by reference. Information relating to the
executive officers of the Company is set forth at Item 4(A) of this report under
the caption "Executive Officers of the Company." Information relating to
compliance with the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended, by the Company's executive officers and
directors, persons who own more than ten percent of the Company's common stock,
and their affiliates who are required to comply with such reporting requirements
is set forth in "Election of Directors -- Section 16(a) Beneficial Ownership
Reporting Compliance" on page 15 of the Company's 1999 Proxy Statement. Such
information is incorporated into this report by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to Director compensation is set forth under the
caption "Election of Directors -- Compensation of Directors" on pages 10 and 11
of the Company's 1999 Proxy Statement, and information relating to executive
compensation is set forth under the caption "Executive Compensation" on pages 16
through 25 of the Company's 1999 Proxy Statement, all of which is incorporated
into this report by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to ownership of the Company's common stock by certain
persons is set forth under the captions "Voting -- Principal Share Owners" and
"Election of Directors -- Security Ownership of Directors and Officers" on page
3 and pages 12 through 15, respectively,
21
<PAGE> 24
of the Company's 1999 Proxy Statement, all of which is incorporated into this
report by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain transactions between the Company, The
Coca-Cola Company and their affiliates and certain other persons is set forth
under the caption "Certain Relationships and Related Transactions" on pages 26
through 29 of the Company's 1999 Proxy Statement, all of which is incorporated
into this report by reference.
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, included in the Company's Annual
Report to Share Owners for the year ended December 31, 1998, are incorporated by
reference into Part II, Item 8 of this report:
Consolidated Statements of Income -- Years ended December 31, 1998,
1997, and 1996.
Consolidated Statements of Cash Flows -- Years ended December 31,
1998, 1997, and 1996.
Consolidated Balance Sheets -- December 31, 1998 and 1997.
Consolidated Statements of Share-Owners' Equity -- Years ended
December 31, 1998, 1997, and 1996.
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>
Report of Independent Auditors.............................. F-2
Schedule II -- Valuation and Qualifying Accounts for the
fiscal years ended December 31, 1998, 1997,
and 1996..................................... F-3
</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 AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
3.1 -- Restated Certificate of Incorporation Exhibit 3 to the Company's Current Report on
of Coca-Cola Enterprises (restated as Form 8-K (Date of Report: July 22, 1997).
of April 15, 1992) as amended by
Certificate of Amendment dated April
21, 1997.
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
3.2 -- Bylaws of Coca-Cola Enterprises, as Exhibit 4.2 to the Company's Registration
amended through February 16, 1999. Statement on Form S-3, No. 333-72713.
4.1 -- Indenture dated as of July 30, 1991, Exhibit 4.1 to the Company's Current Report on
together with the First Supplemental Form 8-K (Date of Report: July 30, 1991);
Indenture thereto dated January 29, Exhibit 4.01 to the Company's Current Report on
1992, between Coca-Cola Enterprises and Form 8-K (Date of Report: January 29, 1992);
The Chase Manhattan Bank, formerly Exhibit 4.02 to the Company's Current Report on
known as Chemical Bank (successor by Form 8-K (Date of Report: January 29, 1992);
merger to Manufacturers Hanover Trust Exhibit 4.01 to the Company's Current Report on
Company), as Trustee, with regard to Form 8-K (Date of Report: September 8, 1992);
certain unsecured and unfunded debt Exhibits 4.01 and 4.02 to the Company's Current
securities of Coca-Cola Enterprises, Report on Form 8-K (Date of Report: November
and forms of notes and debentures 12, 1992); Exhibit 4.01 to the Company's
issued thereunder. 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); Exhibit 4.01 to the
Company's Current Report on Form 8-K (Date of
Report: September 25, 1996); Exhibit 4.01 to
the Company's Current Report on Form 8-K (Date
of Report: October 3, 1996); Exhibit 4.01 to
the Company's Current Report on Form 8-K (Date
of Report: November 19, 1996); Exhibit 4.1 to
the Company's Current Report on Form 8-K (Date
of Report: July 22, 1997); Exhibit 4.2 to the
Company's Current Report on Form 8-K (Date of
Report: July 22, 1997); Exhibit 4.3 to the
Company's Current Report on Form 8-K (Date of
Report: July 22, 1997); Exhibit 4.4 to the
Company's Current Report on Form 8-K (Date of
Report: July 22, 1997); Exhibit 4.01 to the
Company's Current Report on Form 8-K (Date of
Report: December 2, 1997); Exhibit 4.01 to the
Company's Current Report on Form 8-K (Date of
Report: January 6, 1998); Exhibit 4.01 to the
Company's Current Report on Form 8-K (Date of
Report: May 13, 1998); Exhibit 4.01 to the
Company's Current
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
Report on Form 8-K (Date of Report: September
8, 1998); Exhibit 4.01 to the Company's Current
Report on Form 8-K (Date of Report: September
18, 1998); Exhibit 4.01 to the Company's
Current Report on Form 8-K (Date of Report:
October 28, 1998).
4.2 -- Medium-Term Notes Issuing and Paying Exhibit 4.2 to the Company's Annual Report on
Agency Agreement dated as of October Form 10-K for the fiscal year ended December
24, 1994, between Coca-Cola Enterprises 31, 1994.
and The Chase Manhattan Bank formerly
known as 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 Report on
between Coca-Cola Enterprises and Form 8-K (Date of Report: December 12, 1989);
Bankers Trust Company, as Trustee, with Exhibit 4.4(a) to the Company's Annual Report
regard to certain unsecured and on Form 10-K for the fiscal year ended December
unsubordinated debt securities of 29, 1989; Exhibit 4.4(b) to the Company's
Coca-Cola Enterprises, and forms of Annual Report Form 10-K for the fiscal year
Fixed Rate Medium Term Note and ended December 29, 1989.
Floating Rate Medium Term Note, each
issuable commencing December 18, 1989
pursuant to the above-referenced
Indenture.
4.4 -- Five Year Credit Agreement dated as of Exhibit 4.4 to the Company's Annual Report on
November 4, 1996 (the "1996 Credit Form 10-K for the fiscal year ended December
Agreement") among Coca-Cola 31, 1996.
Enterprises; Bottling Holdings (Great
Britain) Limited; Citibank
International PLC; Citibank, N.A.; ABN
AMRO Bank N.V., Atlanta Agency; Bank of
America NT&SA; Bank Brussels Lambert,
New York Branch; CIBC Inc.; Commerzbank
AG; The Dai-Ichi Kangyo Bank, Ltd.,
Atlanta Agency; Deutsche Bank A.G., New
York and/or Cayman Islands Branches;
The First National Bank of Chicago;
Kredietbank N.V., Grand Cayman Branch;
Midland Bank PLC; Nationsbank, N.A.;
The Northern Trust Company; Societe
Generale; SunTrust Bank, Atlanta; Swiss
Bank Corporation, New York Branch;
Texas Commerce Bank, National
Association; Union Bank
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
of Switzerland, New York Branch;
Wachovia Bank of Georgia, N.A.
4.5 -- Amendment No. 1 to the 1996 Credit Exhibit 4.5 to the Company's Annual Report on
Agreement, dated as of September 9, Form 10-K for the fiscal year ended December
1997. 31, 1997.
4.6 -- Programme Agreement dated 25th Exhibit 4.6 to the Company's Annual Report on
September 1997 in respect of a U.S. Form 10-K for the fiscal year ended December
$2,500,000,000 Euro Medium Term Note 31, 1997.
Programme, between and among Coca-Cola
Enterprises, as issuer and guarantor,
Coca-Cola Enterprises Great Britain
plc, as issuer, and ABN AMRO Bank N.V.,
Banque Lehman Brothers, Banque
Nationale de Paris, Citibank
International plc, Credit Suisse First
Boston (Europe) Limited, Deutsche Bank
AG London, Lehman Brothers
International (Europe), Midland Bank
plc, Morgan Stanley & Co. International
Limited, Salomon Brothers International
Limited, Societe General and UBS
Limited, as Dealers.
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 Report on
Enterprises, As Amended through Form 10-K for the fiscal year ended December
February 12, 1991.* 31, 1991.
10.2 -- Form of Stock Option Agreement between Exhibit 10.5 to the Company's Registration
Coca-Cola Enterprises and certain of Statement on Form S-1, No. 33-9447.
its officers.*
10.3 -- Coca-Cola Enterprises 1991 Stock Option Exhibit 10.11 to the Company's Annual Report on
Plan, As Amended and Restated through Form 10-K for the fiscal year ended December
February 18, 1992.* 31, 1992.
10.4 -- Coca-Cola Enterprises 1994 Stock Option Exhibit 4.3 to the Company's Registration
Plan.* Statement on Form S-8, No. 33-53221.
10.5 -- Coca-Cola Enterprises 1995 Stock Option Exhibit 4.3 to the Company's Registration
Plan.* Statement on Form S-8, No. 33-58699.
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
10.6 -- Coca-Cola Enterprises 1992 Restricted Exhibit 4.3 to the Company's Registration
Stock Award Plan (As Amended and Statement on Form S-8, No. 33-53219.
Restated effective February 7, 1994).*
10.7 -- Coca-Cola Enterprises Restricted Stock Exhibit 10.8 to the Company's Annual Report on
Award Tax Withholding Agreement.* Form 10-K for the fiscal year ended December
31, 1995.
10.8 -- Coca-Cola Enterprises 1995 Restricted Exhibit 10.10 to the Company's Annual Report on
Stock Award Plan (As Amended and Form 10-K for the fiscal year ended December
Restated effective January 2, 1996).* 31, 1996.
10.9 -- Coca-Cola Enterprises 1995 Stock Option Exhibit 10.11 to the Company's Annual Report on
Plan (As Amended and Restated effective Form 10-K for the fiscal year ended December
January 2, 1996).* 31, 1996.
10.10 -- Coca-Cola Enterprises 1997 Stock Option Exhibit 10.11 to the Company's Annual Report on
Plan.* Form 10-K for the fiscal year ended December
31, 1997.
10.11 -- Coca-Cola Enterprises Inc. Long-Term Exhibit 10.15 to the Company's Annual Report on
Incentive Plan (As Amended and Restated Form 10-K for the fiscal year ended December
Effective January 1, 1997).* 31, 1997.
10.12 -- Coca-Cola Enterprises Inc. Long-Term Filed herewith.
Incentive Plan (Effective January 1,
1998).*
10.13 -- Coca-Cola Enterprises Executive Filed herewith.
Management Incentive Plan (Effective
January 1, 1998).*
10.14 -- Coca-Cola Enterprises Executive Pension Exhibit 10.16 to the Company Annual Report on
Plan (Effective January 1, 1996).* Form 10-K for the fiscal year ended December
31, 1996.
10.15 -- Coca-Cola Enterprises Supplemental Exhibit 10.18 to the Company's Annual Report on
Pension Plan (As Amended and Restated Form 10-K for the fiscal year ended December
Effective July 1, 1993).* 31, 1997.
10.16 -- 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).*
10.17 -- Form of Stock Option Agreements between Exhibit 10.36 to the Company's Registration
Coca-Cola Enterprises and certain of Statement on Form S-1, No. 33-9447.
its directors.*
10.18 -- Coca-Cola Enterprises 1988 Stock Exhibit 10.10 to the Company's Annual Report on
Appreciation Rights Plan, as amended Form 10-K for the fiscal year ended December
through February 12, 1991.* 31, 1991.
10.19 -- Employment Agreement between Coca-Cola Filed herewith.
Enterprises and Summerfield K.
Johnston, Jr., effective April 17,
1998.*
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
10.20 -- Amended and Restated Deferred Exhibit 10.16 to the Company's Annual Report on
Compensation Agreement between Johnston Form 10-K for the fiscal year ended December
Coca-Cola Bottling Group and Henry A. 31, 1993.
Schimberg dated December 16, 1991, as
amended.*
10.21 -- Employment Agreement between Coca-Cola Filed herewith.
Enterprises and Henry A. Schimberg,
effective April 17, 1998.*
10.22 -- 1993 Amendment and Restatement of Exhibit 10.17 to the Company's Annual Report on
Deferred Compensation Agreement between Form 10-K for the fiscal year ended December
Johnston Coca-Cola Bottling Group and 31, 1993.
John R. Alm as of April 30, 1993.*
10.23 -- Deferred Compensation Plan for Non- Exhibit 4.3 to the Company's Registration
Employee Director Compensation (As Statement on Form S-8, No. 333-47353.
Amended and Restated Effective January
1, 1998).*
10.24 -- 1997 Director Stock Option Plan.* Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 1997.
10.25 -- Coca-Cola Enterprises Inc. Stock Filed herewith.
Deferral Plan (Effective July 1,
1998).*
10.26 -- Tax Sharing Agreement dated November Exhibit 10.1 to the Company's Registration
12, 1986 between Coca-Cola Enterprises Statement on Form S-1, No. 33-9447.
and The Coca-Cola Company.
10.27 -- Registration Rights Agreement dated Exhibit 10.3 to the Company's Registration
November 12, 1986 between Coca-Cola Statement on Form S-1, No. 33-9447.
Enterprises and The Coca-Cola Company.
10.28 -- Registration Rights Agreement dated as Exhibit 10 to the Company's Current Report on
of December 17, 1991 among Coca-Cola Form 8-K (Date of Report: December 18, 1991).
Enterprises, The Coca-Cola Company and
the share owners of Johnston Coca-Cola
Bottling Group named therein.
10.29 -- 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
30, 1988.
10.30 -- Form of Tolling Agreement between The Exhibit 10.41 to the Company's Annual Report on
Coca-Cola Company and various Company Form 10-K for the fiscal year ended January 2,
bottlers. 1987.
10.31 -- Sweetener Sales Agreement -- Bottler Exhibit 10.34 to the Company's Annual Report on
between The Coca-Cola Company and Form 10-K for the fiscal year
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
various Company bottlers, dated July ended December 31, 1997.
10, 1997.
10.32 -- Can Supply Agreement, dated November Exhibit 10.30 to the Company's Annual Report on
30, 1995, between American National Can Form 10-K for the fiscal year ended December
Company and Coca-Cola Enterprises.** 31, 1995.
10.33 -- Share Repurchase Agreement dated Exhibit 10.44 to the Company's Annual Report on
January 1, 1991 between The Coca-Cola Form 10-K for the fiscal year ended December
Company and Coca-Cola Enterprises. 28, 1990.
10.34 -- Form of European Bottlers Agreement. Exhibit 10.33 to the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 1996.
10.35 -- Supplemental Agreement dated January Filed herewith.
30, 1998 between Coca-Cola Enterprises,
its European bottlers and The Coca-Cola
Company and The Coca-Cola Export
Corporation.
12 -- Statement re computation of ratios. Filed herewith.
13 -- 1998 Annual Report to Share Owners Filed herewith.
(Pages 18 to 47).
21 -- Subsidiaries of the Registrant. Filed herewith.
23 -- Consent of Independent Auditors. Filed herewith.
24 -- Powers of Attorney. Filed herewith.
27 -- Financial Data Schedule. Filed herewith.
</TABLE>
- ---------------
* Management contracts and compensatory plans or arrangements required to be
filed as exhibits to this form pursuant to Item 14(c).
** The Company has requested confidential treatment with respect to portions of
this document.
(B) REPORTS ON FORM 8-K
The Company filed the following current reports on Form 8-K either during
the fourth quarter of 1998 or reporting events having occurred during that
quarter:
<TABLE>
<CAPTION>
DATE OF REPORT DESCRIPTION
-------------- -----------
<S> <C>
September 18, 1998................... Terms Agreement dated as of September 18, 1998
relating to the offer and sale of the 6.75%
Debentures Due 2028. (Filed October 6, 1998).
October 2, 1998...................... Financial results for the third quarter and first
nine months of 1998. (Filed October 29, 1998).
October 28, 1998..................... Terms Agreement dated as of October 28, 1998 relating
to the offer and sale of the 5.75% Notes Due 2008.
(Filed February 8, 1999).
</TABLE>
28
<PAGE> 31
(C) EXHIBITS
See Item 14(a)(3) above.
(D) FINANCIAL STATEMENT SCHEDULES
See Item 14(a)(2) above.
29
<PAGE> 32
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/ HENRY A. SCHIMBERG
------------------------------------
Henry A. Schimberg
President and Chief Executive
Officer
Date: March 25, 1999
Pursuant to requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ HENRY A. SCHIMBERG President, Chief Executive March 25, 1999
- ----------------------------------------------------- Officer, and a Director
(Henry A. Schimberg) (principal executive
officer)
/s/ JOHN R. ALM Executive Vice President and March 25, 1999
- ----------------------------------------------------- Chief Financial Officer
(John R. Alm) (principal financial
officer)
/s/ MICHAEL P. COGHLAN Vice President and Controller March 25, 1999
- ----------------------------------------------------- (principal accounting
(Michael P. Coghlan) officer)
* Chairman of the Board of March 25, 1999
- ----------------------------------------------------- Directors
(Summerfield K. Johnston, Jr.)
* Director March 25, 1999
- -----------------------------------------------------
(Howard G. Buffett)
* Director March 25, 1999
- -----------------------------------------------------
(James E. Chestnut)
* Director March 25, 1999
- -----------------------------------------------------
(John L. Clendenin)
* Director March 25, 1999
- -----------------------------------------------------
(Johnnetta B. Cole)
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director March 25, 1999
- -----------------------------------------------------
(J. Trevor Eyton)
* Director March 25, 1999
- -----------------------------------------------------
(Joseph R. Gladden, Jr.)
* Director March 25, 1999
- -----------------------------------------------------
(Claus M. Halle)
* Director March 25, 1999
- -----------------------------------------------------
(L. Phillip Humann)
* Director March 25, 1999
- -----------------------------------------------------
(John E. Jacob)
* Director March 25, 1999
- -----------------------------------------------------
(Robert A. Keller)
* Director March 25, 1999
- -----------------------------------------------------
(Jean-Claude Killy)
* Director March 25, 1999
- -----------------------------------------------------
(Scott L. Probasco, Jr.)
</TABLE>
*By: /s/ LOWRY F. KLINE
-------------------------------
Lowry F. Kline
Attorney-in-Fact
31
<PAGE> 34
INDEX TO FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Schedule II -- Valuation and Qualifying Accounts for the
fiscal years ended December 31, 1998, 1997, and 1996...... F-3
</TABLE>
F-1
<PAGE> 35
COCA-COLA ENTERPRISES INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Coca-Cola Enterprises Inc.
We have audited the consolidated financial statements of Coca-Cola
Enterprises Inc. listed in Part IV, Item 14(a)(1). Our audits also included the
financial statement schedule listed in Part IV, 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, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, 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.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
January 18, 1999
F-2
<PAGE> 36
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
COCA-COLA ENTERPRISES INC.
(IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ----------------------- ------------ ---------
ADDITIONS
-----------------------
CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
----------- ---------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED:
DECEMBER 31, 1998
Allowance for losses on trade
accounts......................... $ 58 $ 11 $ 4(a) $ 16(b) $ 57
Valuation allowance for deferred tax
assets........................... 246 8 -- 49(d) 205
DECEMBER 31, 1997
Allowance for losses on trade
accounts......................... $ 45 $ 11 $ 14(a) $ 12(b) $ 58
Valuation allowance for deferred tax
assets........................... 135 15 109(c) 13(d) 246
DECEMBER 31, 1996
Allowance for losses on trade
accounts......................... $ 33 $ 14 $ 6(a) $ 8(b) $ 45
Valuation allowance for deferred tax
assets........................... 120 9 34(c) 28(d) 135
</TABLE>
- ------------------------------------
(a) At December 31, 1998 and 1997, amounts principally represent allowances for
losses on trade accounts of acquired companies at date of acquisition and,
for all periods, includes recoveries of amounts previously charged off.
(b) Charge off of uncollectible accounts.
(c) Valuation allowances for deferred tax assets of acquired companies at date
of acquisition.
(d) Write-off, reversal and expiration of certain components of the valuation
allowance for deferred tax assets.
F-3
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
3.1 -- Restated Certificate of Incorporation Exhibit 3 to the Company's Current Report on
of Coca-Cola Enterprises (restated as Form 8-K (Date of Report: July 22, 1997).
of April 15, 1992) as amended by
Certificate of Amendment dated April
21, 1997.
3.2 -- Bylaws of Coca-Cola Enterprises, as Exhibit 4.2 to the Company's Registration
amended through February 16, 1999. Statement on Form S-3, No. 333-72713.
4.1 -- Indenture dated as of July 30, 1991, Exhibit 4.1 to the Company's Current Report on
together with the First Supplemental Form 8-K (Date of Report: July 30, 1991);
Indenture thereto dated January 29, Exhibit 4.01 to the Company's Current Report on
1992, between Coca-Cola Enterprises and Form 8-K (Date of Report: January 29, 1992);
The Chase Manhattan Bank, formerly Exhibit 4.02 to the Company's Current Report on
known as Chemical Bank (successor by Form 8-K (Date of Report: January 29, 1992);
merger to Manufacturers Hanover Trust Exhibit 4.01 to the Company's Current Report on
Company), as Trustee, with regard to Form 8-K (Date of Report: September 8, 1992);
certain unsecured and unfunded debt Exhibits 4.01 and 4.02 to the Company's Current
securities of Coca-Cola Enterprises, Report on Form 8-K (Date of Report: November
and forms of notes and debentures 12, 1992); Exhibit 4.01 to the Company's
issued thereunder. 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); Exhibit 4.01 to the
Company's Current Report on Form 8-K (Date of
Report: September 25, 1996); Exhibit 4.01 to
the Company's Current Report on Form 8-K (Date
of Report: October 3, 1996); Exhibit 4.01 to
the Company's Current Report on Form 8-K (Date
of Report: November 19, 1996); Exhibit 4.1 to
the Company's Current Report on Form 8-K (Date
of Report: July 22, 1997); Exhibit 4.2 to the
Company's Current Report on Form 8-K (Date of
Report: July 22, 1997); Exhibit 4.3 to the
Company's Current Report on Form 8-K (Date of
Report: July 22, 1997); Exhibit 4.4 to the
Company's Current Report on Form 8-K (Date of
Report: July 22, 1997); Exhibit 4.01 to the
Company's Current Report on Form 8-K (Date of
Report: December 2, 1997); Exhibit 4.01 to the
Company's Current
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
Report on Form 8-K (Date of Report: January 6,
1998); Exhibit 4.01 to the Company's Current
Report on Form 8-K (Date of Report: May 13,
1998); Exhibit 4.01 to the Company's Current
Report on Form 8-K (Date of Report: September
8, 1998); Exhibit 4.01 to the Company's Current
Report on Form 8-K (Date of Report: September
18, 1998); Exhibit 4.01 to the Company's
Current Report on Form 8-K (Date of Report:
October 28, 1998).
4.2 -- Medium-Term Notes Issuing and Paying Exhibit 4.2 to the Company's Annual Report on
Agency Agreement dated as of October Form 10-K for the fiscal year ended December
24, 1994, between Coca-Cola Enterprises 31, 1994.
and The Chase Manhattan Bank formerly
known as 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 Report on
between Coca-Cola Enterprises and Form 8-K (Date of Report: December 12, 1989);
Bankers Trust Company, as Trustee, with Exhibit 4.4(a) to the Company's Annual Report
regard to certain unsecured and on Form 10-K for the fiscal year ended December
unsubordinated debt securities of 29, 1989; Exhibit 4.4(b) to the Company's
Coca-Cola Enterprises, and forms of Annual Report Form 10-K for the fiscal year
Fixed Rate Medium Term Note and ended December 29, 1989.
Floating Rate Medium Term Note, each
issuable commencing December 18, 1989
pursuant to the above-referenced
Indenture.
4.4 -- Five Year Credit Agreement dated as of Exhibit 4.4 to the Company's Annual Report on
November 4, 1996 (the "1996 Credit Form 10-K for the fiscal year ended December
Agreement") among Coca-Cola 31, 1996.
Enterprises; Bottling Holdings (Great
Britain) Limited; Citibank
International PLC; Citibank, N.A.; ABN
AMRO Bank N.V., Atlanta Agency; Bank of
America NT&SA; Bank Brussels Lambert,
New York Branch; CIBC Inc.; Commerzbank
AG; The Dai-Ichi Kangyo Bank, Ltd.,
Atlanta Agency; Deutsche Bank A.G., New
York and/or Cayman Islands Branches;
The First National Bank of Chicago;
Kredietbank N.V., Grand Cayman Branch;
Midland Bank PLC; Nationsbank, N.A.;
The Northern Trust Company; Societe
Generale; SunTrust Bank, Atlanta; Swiss
Bank Corporation,
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
New York Branch; Texas Commerce Bank,
National Association; Union Bank of
Switzerland, New York Branch; Wachovia
Bank of Georgia, N.A.
4.5 -- Amendment No. 1 to the 1996 Credit Exhibit 4.5 to the Company's Annual Report on
Agreement, dated as of September 9, Form 10-K for the fiscal year ended December
1997. 31, 1997.
4.6 -- Programme Agreement dated 25th Exhibit 4.6 to the Company's Annual Report on
September 1997 in respect of a U.S. Form 10-K for the fiscal year ended December
$2,500,000,000 Euro Medium Term Note 31, 1997.
Programme, between and among Coca-Cola
Enterprises, as issuer and guarantor,
Coca-Cola Enterprises Great Britain
plc, as issuer, and ABN AMRO Bank N.V.,
Banque Lehman Brothers, Banque
Nationale de Paris, Citibank
International plc, Credit Suisse First
Boston (Europe) Limited, Deutsche Bank
AG London, Lehman Brothers
International (Europe), Midland Bank
plc, Morgan Stanley & Co. International
Limited, Salomon Brothers International
Limited, Societe General and UBS
Limited, as Dealers.
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 Report on
Enterprises, As Amended through Form 10-K for the fiscal year ended December
February 12, 1991.* 31, 1991.
10.2 -- Form of Stock Option Agreement between Exhibit 10.5 to the Company's Registration
Coca-Cola Enterprises and certain of Statement on Form S-1, No. 33-9447.
its officers.*
10.3 -- Coca-Cola Enterprises 1991 Stock Option Exhibit 10.11 to the Company's Annual Report on
Plan, As Amended and Restated through Form 10-K for the fiscal year ended December
February 18, 1992.* 31, 1992.
10.4 -- Coca-Cola Enterprises 1994 Stock Option Exhibit 4.3 to the Company's Registration
Plan.* Statement on Form S-8, No. 33-53221.
10.5 -- Coca-Cola Enterprises 1995 Stock Option Exhibit 4.3 to the Company's Registration
Plan.* Statement on Form S-8, No. 33-58699.
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
10.6 -- Coca-Cola Enterprises 1992 Restricted Exhibit 4.3 to the Company's Registration
Stock Award Plan (As Amended and Statement on Form S-8, No. 33-53219.
Restated effective February 7, 1994).*
10.7 -- Coca-Cola Enterprises Restricted Stock Exhibit 10.8 to the Company's Annual Report on
Award Tax Withholding Agreement.* Form 10-K for the fiscal year ended December
31, 1995.
10.8 -- Coca-Cola Enterprises 1995 Restricted Exhibit 10.10 to the Company's Annual Report on
Stock Award Plan (As Amended and Form 10-K for the fiscal year ended December
Restated effective January 2, 1996).* 31, 1996.
10.9 -- Coca-Cola Enterprises 1995 Stock Option Exhibit 10.11 to the Company's Annual Report on
Plan (As Amended and Restated effective Form 10-K for the fiscal year ended December
January 2, 1996).* 31, 1996.
10.10 -- Coca-Cola Enterprises 1997 Stock Option Exhibit 10.11 to the Company's Annual Report on
Plan.* Form 10-K for the fiscal year ended December
31, 1997.
10.11 -- Coca-Cola Enterprises Inc. Long-Term Exhibit 10.15 to the Company's Annual Report on
Incentive Plan (As Amended and Restated Form 10-K for the fiscal year ended December
Effective January 1, 1997).* 31, 1997.
10.12 -- Coca-Cola Enterprises Inc. Long-Term Filed herewith.
Incentive Plan (Effective January 1,
1998).*
10.13 -- Coca-Cola Enterprises Executive Filed herewith.
Management Incentive Plan (Effective
January 1, 1998).*
10.14 -- Coca-Cola Enterprises Executive Pension Exhibit 10.16 to the Company Annual Report on
Plan (Effective January 1, 1996).* Form 10-K for the fiscal year ended December
31, 1996.
10.15 -- Coca-Cola Enterprises Supplemental Exhibit 10.18 to the Company's Annual Report on
Pension Plan (As Amended and Restated Form 10-K for the fiscal year ended December
Effective July 1, 1993).* 31, 1997.
10.16 -- 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).*
10.17 -- Form of Stock Option Agreements between Exhibit 10.36 to the Company's Registration
Coca-Cola Enterprises and certain of Statement on Form S-1, No. 33-9447.
its directors.*
10.18 -- Coca-Cola Enterprises 1988 Stock Exhibit 10.10 to the Company's Annual Report on
Appreciation Rights Plan, as amended Form 10-K for the fiscal year ended December
through February 12, 1991.* 31, 1991.
10.19 -- Employment Agreement between Coca-Cola Filed herewith.
Enterprises and Summerfield K.
Johnston, Jr., effective April 17,
1998.*
10.20 -- Amended and Restated Deferred Exhibit 10.16 to the Company's Annual Report on
Compensation Agreement between Form 10-K for the fiscal year
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
Johnston Coca-Cola Bottling Group and ended December 31, 1993.
Henry A. Schimberg dated December 16,
1991, as amended.*
10.21 -- Employment Agreement between Coca-Cola Filed herewith.
Enterprises and Henry A. Schimberg,
effective April 17, 1998.*
10.22 -- 1993 Amendment and Restatement of Exhibit 10.17 to the Company's Annual Report on
Deferred Compensation Agreement between Form 10-K for the fiscal year ended December
Johnston Coca-Cola Bottling Group and 31, 1993.
John R. Alm as of April 30, 1993.*
10.23 -- Deferred Compensation Plan for Non- Exhibit 4.3 to the Company's Registration
Employee Director Compensation (As Statement on Form S-8, No. 333-47353.
Amended and Restated Effective January
1, 1998).*
10.24 -- 1997 Director Stock Option Plan.* Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 1997.
10.25 -- Coca-Cola Enterprises Inc. Stock Filed herewith.
Deferral Plan (Effective July 1,
1998).*
10.26 -- Tax Sharing Agreement dated November Exhibit 10.1 to the Company's Registration
12, 1986 between Coca-Cola Enterprises Statement on Form S-1, No. 33-9447.
and The Coca-Cola Company.
10.27 -- Registration Rights Agreement dated Exhibit 10.3 to the Company's Registration
November 12, 1986 between Coca-Cola Statement on Form S-1, No. 33-9447.
Enterprises and The Coca-Cola Company.
10.28 -- Registration Rights Agreement dated as Exhibit 10 to the Company's Current Report on
of December 17, 1991 among Coca-Cola Form 8-K (Date of Report: December 18, 1991).
Enterprises, The Coca-Cola Company and
the share owners of Johnston Coca-Cola
Bottling Group named therein.
10.29 -- 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
30, 1988.
10.30 -- Form of Tolling Agreement between The Exhibit 10.41 to the Company's Annual Report on
Coca-Cola Company and various Company Form 10-K for the fiscal year ended January 2,
bottlers. 1987.
10.31 -- Sweetener Sales Agreement -- Bottler Exhibit 10.34 to the Company's Annual Report on
between The Coca-Cola Company and Form 10-K for the fiscal year ended December
various Company bottlers, dated July 31, 1997.
10, 1997.
10.32 -- Can Supply Agreement, dated November Exhibit 10.30 to the Company's Annual Report on
30, 1995, between American Form 10-K for the fiscal year
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE OR FILED HEREWITH
(THE COMPANY'S CURRENT, QUARTERLY, AND ANNUAL
REPORTS ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER FILE NO. 01-09300;
THE COMPANY'S REGISTRATION STATEMENTS HAVE THE
EXHIBIT FILE NUMBERS NOTED WHEREVER SUCH STATEMENTS ARE
NUMBER DESCRIPTION IDENTIFIED IN THE EXHIBIT LISTING)
- ------- ----------- -----------------------------------------------
<C> <C> <S> <C>
National Can Company and Coca-Cola ended December 31, 1995.
Enterprises.**
10.33 -- Share Repurchase Agreement dated Exhibit 10.44 to the Company's Annual Report on
January 1, 1991 between The Coca-Cola Form 10-K for the fiscal year ended December
Company and Coca-Cola Enterprises. 28, 1990.
10.34 -- Form of European Bottlers Agreement. Exhibit 10.33 to the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 1996.
10.35 -- Supplemental Agreement dated January Filed herewith.
30, 1998 between Coca-Cola Enterprises,
its European bottlers and The Coca-Cola
Company and The Coca-Cola Export
Corporation.
12 -- Statement re computation of ratios. Filed herewith.
13 -- 1998 Annual Report to Share Owners Filed herewith.
(Pages 18 to 47).
21 -- Subsidiaries of the Registrant. Filed herewith.
23 -- Consent of Independent Auditors. Filed herewith.
24 -- Powers of Attorney. Filed herewith.
27 -- Financial Data Schedule. Filed herewith.
</TABLE>
- ---------------
* Management contracts and compensatory plans or arrangements required to be
filed as exhibits to this form pursuant to Item 14(c).
** The Company has requested confidential treatment with respect to portions of
this document.
<PAGE> 43
(LOGO)
<PAGE> 1
EXHIBIT 10.12
LONG-TERM INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1998)
SECTION 1. PURPOSE.
The purpose of the Long-Term Incentive Plan (the "Plan") is to advance the
interest of Coca-Cola Enterprises Inc. (the "Company") by providing key
management and sales employees with incentive to assist the Company in meeting
and exceeding its business goals.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Compensation Committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board") from among its
members and shall be comprised of not fewer than two members who shall be
"outside directors" within the meaning of Section 162(m) and the regulations
thereunder of the Internal Revenue Code of 1986, as amended (the "Code").
The Committee may, subject to the provisions of the Plan, establish such rules
and regulations or take such action as it deems necessary or advisable for the
proper administration of the Plan. Each determination made or action taken
pursuant to the Plan, including interpretation of the Plan, shall be final and
conclusive for all purposes and upon all persons, including, but not limited to,
the Company, the Committee, the Board, officers, the affected Participants (as
defined in Section 3), and their respective successors in interest.
In addition to such other rights of indemnification as they have as directors
or as members of the Committee, the members of the Committee shall be
indemnified by the Company against reasonable expenses (including, but not
limited to, attorneys' fees) incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal, to which they or
any of them may be a party by reason of any action taken or failure to act in
connection with the Plan, and against all amounts paid by them in settlement
thereof (provided such settlement is approved to the extent required by and in
the manner provided by the Certificate of Incorporation or Bylaws of the Company
relating to indemnification of directors) or paid by them in satisfaction of a
judgment in any such action, suit, or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member or members did not act in good faith and in a manner he, she or
they reasonably believed to be in or not opposed to the best interest of the
Company.
SECTION 3. ELIGIBILITY.
Cash awards ("Awards") may be made under this Plan to the persons who are
executive officers; in the senior executive band; in the executive band;
corporate directors; and, as such positions are defined by the Compensation
Committee, senior staff of the Company and its Subsidiaries ("Participants").
"Subsidiary" shall mean any corporation or other business organization in
which the Company owns, directly or indirectly, 25% or more of the voting stock
or capital during a Performance Period.
SECTION 4. PERFORMANCE GOAL CRITERIA.
Awards made under the Plan shall be paid solely on account of the attainment
of specified increases in cash operating profit ("COP"), as measured on a
corporate-wide basis, over the period of three consecutive calendar years (the
"Performance Period") beginning on January 1 of any year the Compensation
<PAGE> 2
Committee designates as the beginning of a Performance Period for which an Award
shall be made. The Committee shall preestablish the specific COP targets for
each Performance Period in accordance with Code Section 162(m) and regulations
thereunder. For the purposes of the Plan, COP is determined as operating income
plus depreciation and amortization, normalized for acquisitions, divestitures
and other significant financial events.
SECTION 5. CALCULATION OF THE AWARD.
The Committee has established Award levels, described as percentages by which
a Participant's Average Annual Base Salary shall be multiplied, to determine the
amount of an Award payable upon the attainment of specified increases in the
corporate-wide COP. "Average Annual Base Salary" means the average of the base
salary in effect on the last day of each year of the three-year Performance
Period for which an Award is made. Notwithstanding the preceding, the Average
Annual Base Salary used to calculate an Award paid to a Participant may not
exceed such Participant's annual base salary in effect on January 1 that
constitutes the beginning of the Performance Period for which the Award is being
paid, increased by 33 1/3%. No Award under the Plan shall exceed 160% of a
Participant's Average Annual Base Salary.
SECTION 6. PAYMENT OF AWARD AND DEFINITIONS.
(i) Awards shall be paid in cash after the end of the Performance Period in
one or more installments, as determined by the Committee.
(ii) "Retirement" means a Participant's voluntary termination of employment on
a date which is on or after the earliest date on which such Participant would be
eligible for an immediately payable benefit pursuant to the terms of the defined
benefit pension plan sponsored by the Company or a Subsidiary in which the
Participant participates. If the Participant does not participate in such a
plan, the date shall be determined as if the Participant participated in the
Company's defined benefit plan covering the majority of its non-bargaining
employees in the United States.
(iii) "Disability" shall be determined according to the definition of "total
and permanent disability," in effect at the time of the determination, in the
defined benefit plan sponsored by the Company or a Subsidiary in which the
Participant participates. If the Participant does not participate in such a
plan, the definition shall be determined as if the Participant participated in
the Company's defined benefit plan covering the majority of its non-bargaining
employees in the United States.
SECTION 7. PRORATED AND PARTIAL AWARDS.
(i) If during the years to which the Plan applies, an employee is hired or
promoted into a position eligible for participation in the Plan, the employee
shall be eligible to receive a prorated Award for the period of partial
participation. To calculate the Average Annual Base Salary for a prorated Award,
each year's annual base salary shall be prorated based on the period in which
the employee was employed in the eligible position.
(ii) If a Participant is promoted from one position to another position
eligible for participation under the Plan, the Participant's Award shall be
prorated for the period of time the Participant was employed within each
position. The base salary in effect on the last day of each year shall be
included in the calculation of the Participant's Average Annual Base Salary,
irrespective of the changes of positions. Prorated awards shall be measured
according to the number of whole months in which a Participant was employed
within each position for which the Award is made.
(iii) If, within a Performance Period, a Participant transfers from a
<PAGE> 3
position eligible for participation under the Plan to a position ineligible for
participation, a prorated Award shall be paid to such Participant for the period
of time the Participant was employed within the eligible position. The
Participant's annual base salary in effect on the last day of the Participant's
employment in the eligible position shall be included in the calculation of the
Participant's Average Annual Base Salary, irrespective of the change of
positions. Prorated awards shall be measured according to the number of whole
months in which the Participant was employed within one or more eligible
positions.
(iv) Partial Awards under this Section 7 shall not be paid to a Participant
whose employment is terminated prior to the last day of the Performance Period
unless the reason for such termination was the Participant's death, disability,
or retirement (as defined in Section 6). To determine the Average Annual Base
Salary to be used in calculating a partial Award, each year's base salary shall
be prorated for the period in which the Participant was employed in an eligible
position during the Performance Period. A partial Award paid to a Participant
whose employment is terminated on account of death or disability shall be
calculated based on the increase in COP as of December 31st of the year
preceding the Participant's termination and shall be paid in the year following
such Participant's termination of employment. A partial Award paid to a
Participant whose employment is terminated on account of retirement shall be
paid in the year following the end of the Performance Period for which the Award
is made, and subject to the Committee's discretion described in Section 8, shall
be calculated on the basis of the increase in COP through the end of the
Performance Period.
(v) For purposes of this Section 7, a Participant's employment with the
Company will be deemed not to be a termination of employment if the
Participant's reason for termination with the Company is due to immediate
employment with any Affiliate; however, in such event, the Participant's Award
shall be subject to proration as if the Participant transferred to a position
within the Company that is ineligible for participation in the Plan. The term
"Affiliate" shall include The Coca-Cola Company or any corporation or business
entity in which The Coca-Cola Company owns, directly or indirectly, 25% or more
of the voting stock or capital if such company is a party to an active
reciprocity agreement with the Company and the Company has assented to the
Participant's subsequent employment.
SECTION 8. DISCRETION OF THE COMPENSATION COMMITTEE.
All Awards shall be made solely on the basis of the performance goals set
forth by the Committee pursuant to Section 4 and only in accordance with the
standards set forth in Section 5. The Committee shall have no authority to
increase the amount of an Award payable to a Participant which would otherwise
be due upon the attainment of the performance goal. The Committee shall,
however, have the authority to reduce or eliminate any Award under the Plan.
SECTION 9. COMMITTEE CERTIFICATION.
Prior to payment of an Award, the Committee shall certify in writing that the
performance targets described in Section 4 have, in fact, been satisfied.
SECTION 10. AMENDMENTS, MODIFICATION AND TERMINATION OF THE PLAN.
The Board or the Committee may terminate the Plan in whole or in part, may
suspend the Plan in whole or in part from time to time, and may amend the Plan
from time to time to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in the Awards made thereunder that does not
constitute the modification of a material term of the Plan, without the approval
of the share owners of the Company. No action shall be taken, however, without
the approval of the share owners of the Company unless the
<PAGE> 4
Committee determines that the approval of share owners would not be necessary to
retain the benefits of Section 162(m) of the Internal Revenue Code of 1986, as
amended.
SECTION 11. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant thereto shall
be governed by the laws of the State of Georgia and construed in accordance
therewith.
<PAGE> 1
EXHIBIT 10.13
EXECUTIVE MANAGEMENT INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1998)
SECTION 1. PURPOSE.
The purpose of the Executive Management Incentive Plan (the "Plan") is to
advance the interest of Coca-Cola Enterprises Inc. (the "Company") by providing
executive officers and managers of the Company with incentive to assist the
Company in meeting and exceeding its business goals.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Compensation Committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board") from among its
members and shall be comprised of not fewer than two members who shall be
"outside directors" within the meaning of Section 162(m) and the regulations
thereunder of the Internal Revenue Code of 1986, as amended (the "Code").
The Committee may, subject to the provisions of the Plan, establish such rules
and regulations or take such action as it deems necessary or advisable for the
proper administration of the Plan. Each interpretation made or action taken
pursuant to the Plan shall be final and conclusive for all purposes and binding
upon all persons, including, but not limited to, the Company, the Committee, the
Board, the affected Participants (as defined in Section 3), and their respective
successors in interest.
In addition to such other rights of indemnification as they have as directors
or as members of the Committee, the members of the Committee shall be
indemnified by the Company against reasonable expenses (including, but not
limited to, attorneys' fees) incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal, to which they or
any of them may be a party by reason of any action taken or failure to act in
connection with the Plan, and against all amounts paid by them in settlement
thereof (provided such settlement is approved to the extent required by and in
the manner provided by the Certificate of Incorporation or Bylaws of the Company
relating to indemnification of directors) or paid by them in satisfaction of a
judgment in any such action, suit, or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member or members did not act in good faith and in a manner he, she or
they reasonably believed to be in or not opposed to the best interest of the
Company.
SECTION 3. ELIGIBILITY.
Cash awards ("Awards") may be made under this Plan to persons who are
executive officers, in the senior executive band, and in the executive band of
the Company and its Subsidiaries ("Participants").
"Subsidiary" shall mean any corporation or other business organization in
which the Company owns, directly or indirectly, 25% or more of the voting stock
or capital during any Performance Period.
1
<PAGE> 2
SECTION 4. PERFORMANCE GOAL CRITERIA.
The Committee shall establish specific objective targets in relation to the
cash operating profit as budgeted by the Company ("budgeted COP") for each
performance unit of the Company over a period of a calendar year (the
"Performance Period") designated by the Compensation Committee as a Performance
Period for which an Award shall be made. Awards under the Plan shall be paid
solely on account of the attainment of these targets, which shall be
preestablished in accordance with Code Section 162(m) and regulations
thereunder. For the purposes of the Plan, COP shall be determined as operating
income plus depreciation and amortization, normalized for acquisitions,
divestitures and other significant financial events. For purposes of the Plan,
performance units shall be classified as corporate, group or region, or any
combination thereof.
SECTION 5. CALCULATION OF AWARDS.
The Committee shall establish Award levels, described as percentages by which
a Participant's annual base salary shall be multiplied, to determine the amount
of an Award payable upon the attainment of specified targets of budgeted COP. No
award under the Plan shall exceed 115% percent of a Participant's annual base
salary. An award paid to a Participant shall be calculated using the annual base
salary in effect on December 31 of the year for which the Award is made.
Notwithstanding the preceding sentence, the annual base salary used to calculate
an Award paid to a Participant (under this Section 5 or Section 6) may not
exceed such Participant's annual base salary in effect on January 1 of any
Performance Period for which the Award is made, increased by 10%.
SECTION 6. PRORATED AND PARTIAL AWARDS.
(i) A person hired or promoted into a position identified in Section 3
("Eligible Position") during a Performance Period shall receive a prorated Award
for the period of time the person was employed in an Eligible Position, using
the Participant's base salary in effect on December 31 of the Performance Period
for which the Award is made.
(ii) A Participant who is promoted from one Eligible Position to another
Eligible Position during a Performance Period shall receive an Award that is
prorated for the period of time the Participant was employed within each
Eligible Position, using the Participant's annual base salary in effect on
December 31 of the Performance Period for which the Award is made.
(iii) A Participant who is not employed in an Eligible Position on the last
day of the Performance Period due to the Participant's transfer to a position
with the Company or a Subsidiary that is not an Eligible Position shall receive
an Award that is prorated for the period of time the Participant was employed in
an Eligible Position, using the Participant's annual salary on the last day that
the Participant is employed in that Eligible Position.
(iv) A Participant whose employment is terminated prior to the last day of the
Performance Period shall not receive an Award that is prorated for the period of
time the Participant was employed in an Eligible Position unless the reason for
such termination was the Participant's death, disability, or retirement. For
purposes of this Section 6, a Participant's employment with the Company will be
deemed not to be terminated if the Participant's reason for termination was due
to immediate employment with any Affiliate; however,
2
<PAGE> 3
such Participant's Award shall be prorated as if the Participant transferred
from an Eligible Position to a position that is ineligible for participation in
the Plan. The term "Affiliate" shall include The Coca-Cola Company or any
corporation or business entity in which The Coca-Cola Company owns, directly or
indirectly, 25% or more of the voting stock or capital if such Company is a
party to an active reciprocity agreement with the Company and the Company has
assented to the Participant's subsequent employment.
(v) For purposes of this Section 6:
(a) "Retirement" means a Participant's voluntary termination of employment
on a date which is on or after the earliest date on which such Participant would
be eligible for an immediately payable benefit pursuant to the terms of the
defined benefit pension plan sponsored by the Company or a Subsidiary in which
the Participant participates. If the Participant does not participate in such a
plan, the date shall be determined as if the Participant participated in the
Company's defined benefit plan covering the majority of its non-bargaining
employees in the United States.
(b) "Disability" shall be determined according to the definition of "total
and permanent disability," in effect at the time of the determination, in the
defined benefit plan sponsored by the Company or a Subsidiary in which the
Participant participates. If the Participant does not participate in such a
plan, the definition shall be determined as if the Participant participated in
the Company's defined benefit plan covering the majority of its non-bargaining
employees in the United States.
(c) "Prorated" means the determination of the amount of an Award for
partial participation that is measured according to the nearest whole number of
months in which a Participant was employed in an Eligible Position(s) during the
Performance Period for which the Award is made.
SECTION 7. DISCRETION OF THE COMPENSATION COMMITTEE.
All Awards shall be made solely on the basis of the performance goals set
forth by the Committee pursuant to Section 4 and only in accordance with the
standards set forth in Section 5. The Committee shall have no authority to
increase the amount of an Award payable to a Participant which would otherwise
be due upon the attainment of the performance goal. The Committee shall,
however, have the authority to reduce or eliminate any Award under the Plan.
SECTION 8. COMMITTEE CERTIFICATION.
Prior to the payment of an Award, the Committee shall certify in writing that
the performance targets of Section 4 have, in fact, been satisfied.
SECTION 9. AMENDMENTS, MODIFICATION AND TERMINATION OF THE PLAN.
The Board or the Committee may terminate the Plan in whole or in part, may
suspend the Plan in whole or in part from time to time, and may amend the Plan
from time to time to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in the Awards made thereunder that does not
constitute the modification of a material term of the Plan, without the approval
of the share owners of the Company. No action shall be taken, however, without
the approval of the share owners unless the Committee determines that the
approval of share owners would not be necessary to retain the benefits of
Section 162(m) of the Internal Revenue Code of 1986, as amended.
3
<PAGE> 4
SECTION 10. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant thereto shall
be governed by the laws of the State of Georgia and construed in accordance
therewith.
4
<PAGE> 1
EXHIBIT 10.19
COCA-COLA ENTERPRISES INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") effective April 17, 1998,
between Coca-Cola Enterprises Inc. (the "Company") and Summerfield K. Johnston,
Jr. ("Mr. Johnston").
WHEREAS, the Company desires to ensure a successful transition in the
management of the Company prior to and following Mr. Johnston's retirement and
to benefit from Mr. Johnston's valuable experience and expertise; and
WHEREAS, Mr. Johnston desires to assist the Company in the period
following his resignation as Chief Executive Officer and to continue to provide
consulting services to the Company following his retirement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties do hereby agree as
follows:
1. Term of Employment. Mr. Johnston's "Employment Period," as
this term is used throughout the Agreement, shall begin April 17, 1998 and
shall continue until such time as determined by the Company's Board of
Directors, unless earlier terminated pursuant to Section 15 herein.
2. Position and Title During Employment Period. During the
Employment Period, Mr. Johnston shall serve in the capacity as Chairman of the
Board of Directors of the Company and Senior Executive Officer.
3. Compensation During Employment Period. The Company shall pay
to Mr. Johnston base salary compensation at the rate of $650,000 per year until
January 1, 1999, and thereafter as determined by the Compensation Committee of
the Company's Board of Directors.
4. Incentive Plan Bonuses. During the Employment Period, Mr.
Johnston shall be eligible to participate in the Executive Management Incentive
Plan and the Long-Term Incentive Plan (each referred to herein as an "Incentive
Plan") for any Performance Period (as that term is defined in each such plan)
for which an Incentive Plan is adopted. In the event the Employment Period ends
prior to the end of a Performance Period, Mr. Johnston's award under the
relevant Incentive Plan shall be prorated and paid in accordance with the terms
of such plan.
5. Employee and Fringe Benefits. During the Employment Period,
Mr. Johnston shall be eligible to participate in all employee and fringe
benefit plans for which he is otherwise eligible as an employee of the Company,
which participation shall be governed by the terms of the relevant plans.
6. Term of Consulting Services Period. Mr. Johnston's
"Consulting Services Period," as this term is used throughout the Agreement,
shall begin on the date on which the Employment Period ends and shall continue
for a term ending on January 1, 2003. During the Consulting Services Period,
Mr. Johnston agrees to
<PAGE> 2
provide Company with such time and services as Company may reasonably request,
with the time and effort devoted to consulting services to be consistent with
Mr. Johnston's nonfulltime status and availability in view of his involvement
in other non-Coca-Cola business and activities; provided, such other business
activities are consistent with Section 16 of this Agreement. Specifically, Mr.
Johnston's consulting services shall include:
(a) Continuing service on the Company's Board of
Directors (subject to election by the Company's share owners) and
holding the position of Chairman of the Board for such period as
determined by the Company's Board of Directors; and
(b) Consulting with the Company on strategic planning,
maintaining and enhancing the Company's strategic alignment with The
Coca-Cola Company and the identification of acquisition opportunities
for the Company, and such other duties and responsibilities assigned
to him by the Company's Board of Directors from time to time.
7. Position and Title During Consulting Services Period. During
the Consulting Services Period, Mr. Johnston shall hold the title of Consultant
to Coca-Cola Enterprises Inc. and shall report to the Company's Board of
Directors.
8. Compensation for During Consulting Services Period. The
Company shall pay Mr. Johnston a consulting fee of $50,000 per month.
Compensation paid pursuant to this Section 8 shall be in addition to any fees
Mr. Johnston earns for service on the Company's Board of Directors or on the
Board of Directors of other Coca-Cola bottling companies.
9. Retiree Benefits During Consulting Services Period. During
the Consulting Services Period, Mr. Johnston and his eligible dependents shall
be eligible to participate in the Company's Executive Retiree Medical Plan,
which plan shall provide the same medical benefits (and on the same basis) as
provided under the medical plan covering active nonunion employees of the
Company, as it may be amended from time to time. At the end of the Consulting
Services Period, Mr. Johnston shall no longer be eligible to participate in the
Executive Retiree Medical Plan but shall be eligible to participate in the
Company's Retiree Medical Plan for which he would eligible if his employment
were terminated at that time. Mr. Johnston shall be eligible to participate in
the Company's financial planning and tax benefit plans on the same basis as
other eligible employees.
10. Service for Stock Award Vesting Purposes. During the
Consulting Services Period, the Company shall treat Mr. Johnston as an active
employee for purposes of crediting service in the determination of the vesting
of any stock awards Mr. Johnston may hold during such period.
11. Company Aircraft. During the Consulting Services Period, the
Company shall make its aircraft available to Mr. Johnston for his use when
performing consulting services pursuant to this Agreement.
12. Independent Contractor. The Company and Mr. Johnston agree
that Mr. Johnston will act as an independent contractor in
<PAGE> 3
the performance of his duties during the Consulting Services Period.
Accordingly, Mr. Johnston shall be responsible for payment of all taxes
including federal, state and local taxes arising out of the provision of
consulting services in accordance with this Agreement.
13. Personnel and Office Accommodations. During the Consulting
Services Period, the Company will provide Mr. Johnston with an office and
secretary in its corporate offices in order to assist him in the performance of
his consulting services.
14. Expenses. The Company shall reimburse the Mr. Johnston for
all expenses incurred by Mr. Johnston in connection with the performance of his
duties hereunder, whether performed during the Employment Period or the
Consulting Services Period. All amounts to be reimbursed to the Mr. Johnston
pursuant to this Section shall be paid within ninety days (90) days following
the delivery of the expense invoice to the Company.
15. Termination of Employment and Consulting Agreement. This
Agreement shall terminate upon Mr. Johnston's death, disability or the
existence of circumstances constituting a termination for "cause," as
hereinafter defined. In the event of such termination, the Company shall pay to
Mr. Johnston or his estate all amounts owed and payable to him under this
Agreement as of the date of such termination. For purposes of this Section 15,
"cause" shall mean Mr. Johnston's willful failure or inability to carry out his
duties and responsibilities in any material respect, the commission of a felony
or commission of any willful or intentional act, unprofessional or unethical
act which has or would have, if such act becomes public knowledge, a
substantial and adverse effect on the business operations or reputation of the
Company.
16. Non-Competition; Confidentiality. For a period of two years
from the end of the Consulting Services Period, Mr. Johnston shall not,
directly or indirectly engage in, participate in or have any interest as a
consultant, partner, joint venture, proprietor, employee, officer, director,
agent, security holder, creditor or consultant, or in any other capacity, or
have any other direct or indirect financial interest in any business, firm,
person, partnership, corporation (other than the Company or The Coca-Cola
Company) engaged in any activity similar to or competitive with the business
now engaged in by the Company or The Coca-Cola Company, including, but not
limited to, manufacturing, producing or distributing liquid, nonalcoholic
beverages in any geographic area in which the Company or The Coca-Cola Company
or any licensee of The Coca-Cola Company has operations during or at the
conclusion of the Consulting Services Period; except nothing herein shall be
deemed to prevent or limit the right of Mr. Johnston to own capital stock or
other securities of any corporation, the securities of which are publicly owned
or regularly traded in the over-the-counter market or on any securities
exchange, provided that Mr. Johnston does not acquire beneficial ownership (as
determined under Rule 13d-3 of the Securities Exchange Act of 1934) of more
than one percent of the issuer's outstanding securities of that class.
17. Enforcement.
(a) The parties recognize that the nature of the subject
matter of this Agreement, including Section 16,
<PAGE> 4
would make it impracticable and extremely difficult to determine actual
damages to the Company in the event of a breach of this Agreement by
Mr. Johnston. Accordingly, if Mr. Johnston commits a breach or
threatens to commit a breach of any of the provisions of this
Agreement, the Company shall have the right and remedy to have the
provisions of the Agreement specifically enforced by any court having
equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to
the Company. The rights of the Company to equitable relief in the
enforcement of this Agreement shall be in addition to any and all other
remedies available through an action in law.
(b) If any of the covenants contained in Section 16, or
any part thereof, are held to be unenforceable because of the duration
of such provisions or the area covered thereby, the undersigned agree
that the court making such determination shall have the power to
reduce the duration and the area or both of any such provision and, in
its reduced form, said provision shall then be enforceable.
(c) Should any other portion of this Agreement be
declared invalid for any reason or to have ceased to have been binding
on the parties hereto, said provision shall be severed and all other
provisions shall continue to be effective and binding.
(d) Notwithstanding anything herein to the contrary, the
Company shall not be relieved of any of its obligations hereunder to
Mr. Johnston in the event of determination by any court, arbitrator,
or other governing authority that the covenants contained in Section
16 are unenforceable or to limit the enforceability of any such
covenants.
18. Binding Effect and Assignment. This Agreement benefits and
binds the Company and Mr. Johnston and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
Notwithstanding the foregoing, neither party shall be entitled to assign this
Agreement or rights hereunder without the prior written consent of the other
party; provided however, that at any time following commencement of the
Consulting Services Period Mr. Johnston may assign his rights under this
Agreement to a corporation, partnership or limited liability company controlled
by Mr. Johnston, subject to the condition that all services and other duties
and responsibilities shall be performed solely by Mr. Johnston.
19. Headings; Definitions. The headings of sections contained in
this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof. The parties agree to all definitions in the
statement of parties to this Agreement and in the other introductory language
to this Agreement.
20. Controlling Law; Amendment; Waiver. This Agreement shall be
governed by the laws of the State of Georgia. This Agreement may not be altered
or amended except in writing signed by the parties. The failure of any party
hereto at any time to require performance of any provisions hereof shall in no
manner
<PAGE> 5
affect the right to subsequently enforce the same. No waiver by any party
hereto of any condition, or of the breach of any term, provisions, warranty,
representation, agreement or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver
of any other condition or of the breach of any other term, provision, warranty,
representation, agreement or covenant herein contained.
21. Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the Company and Mr. Johnston with respect
to the subject matter hereof and supersedes all prior negotiations,
understandings and agreements, whether written or oral, between the Company and
Mr. Johnston with respect to the subject matter hereof.
SUMMERFIELD K. JOHNSTON, JR. COCA-COLA ENTERPRISES INC.
S/ SUMMERFIELD K. JOHNSTON, JR.
By: /s/ JOHN L. CLENDENIN
- ---------------------------------- -----------------------------------
Title: Chairman Compensation Committee
-------------------------------
April 27, 1998
- ---------------------------------- --------------------------------------
Date Date
<PAGE> 1
EXHIBIT 10.21
COCA-COLA ENTERPRISES INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") effective April 17, 1998,
between Coca-Cola Enterprises Inc. (the "Company") and Henry A. Schimberg ("Mr.
Schimberg").
WHEREAS, Mr. Schimberg is presently employed by the Company as the
President and Chief Operating Officer; and
WHEREAS, the Company desires to ensure Mr. Schimberg's continued
employment and to have Mr. Schimberg serve in the position of President and
Chief Executive Officer for a period of two years from the effective date of
this Agreement, and thereafter to have Mr. Schimberg to serve as a consultant
to the Company and The Coca-Cola Company and their related companies; and
WHEREAS, Mr. Schimberg desires to serve in these capacities.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties do hereby agree as
follows:
1. Term of Employment. Mr. Schimberg's "Employment Period," as
this term is used throughout the Agreement, shall begin April 17, 1998 and
shall continue for a period of two years, subject to earlier termination as
expressly provided in Section 8 hereof.
2. Position and Title During Employment Period. During the
Employment Period, Mr. Schimberg shall serve in the capacity as President and
Chief Executive Officer of the Company.
3. Compensation During Employment Period. The Company shall pay
to Mr. Schimberg base salary compensation at the rate of $1,150,000 per year
until January 1, 1999, and thereafter as determined by the Compensation
Committee of the Company's Board of Directors.
4. Incentive Plan Bonuses. During the Employment Period, Mr.
Schimberg shall be eligible to participate in the Executive Management
Incentive Plan and the Long-Term Incentive Plan (each referred to herein as an
"Incentive Plan") for any Performance Period (as that term is defined in each
such plan) for which an Incentive Plan is adopted. In the event the Employment
Period ends prior to the end of a Performance Period, Mr. Schimberg's award
under the relevant Incentive Plan shall be prorated and paid in accordance with
the terms of such plan.
5. Employee and Fringe Benefits. During the Employment Period,
Mr. Schimberg shall be eligible to participate in all employee and fringe
benefit plans for which he is otherwise eligible as an employee of the Company,
which participation shall be governed by the terms of the relevant plans.
6. Special Stock Option Grant. The Company shall, on the
effective date of this Agreement, grant Mr. Schimberg 600,000 stock options in
a special multi-year grant, which grant is intended to represent all stock
grants for which Mr. Schimberg will be eligible during the Employment Period.
The terms of the stock option grant made pursuant to this Section 6 are set
forth in the Stock Option
<PAGE> 2
Agreement, attached hereto as Appendix A.
7. Consulting Services Upon Termination of Employment. Upon the
termination or expiration of the Employment Period, Mr. Schimberg shall enter
into a consulting agreement with the Company and/or The Coca-Cola Company,
which agreement shall provide, under terms mutually agreed upon by the parties,
for the following:
(a) Mr. Schimberg to, for the period after his
termination of employment through April 2003, provide such time and
services as Company and The Coca-Cola Company may reasonably request,
with the time and effort devoted to consulting services ("Consulting
Services") to be consistent with Mr. Schimberg's non-full time status
and availability in view of his involvement in other non-Coca-Cola
business and activities. Specifically, Mr. Schimberg's Consulting
Services will include:
(i) Continuing service on the Company's Board of
Directors (subject to election by the Company's share owners)
and service on the Board of Directors of other Coca-Cola
bottling companies, as determined from time-to-time by the
Company or The Coca-Cola Company;
(ii) Consulting with the Company and The Coca-Cola
Company on special projects, such as projects related, but
not limited, to marketing and product distribution, as shall
be mutually determined by the parties from time to time; and
(iii) "Trouble-shooting" within the Coca-Cola system on
project-by-project basis, as shall be mutually determined by
the parties from time to time;
(b) Mr. Schimberg to have the title of Consultant to the
Company and The Coca-Cola Company, reporting to the Chief Executive
Officer of The Coca-Cola Company.
(c) Mr. Schimberg to receive consulting fees of $400,000
per year paid by the Company and/or The Coca-Cola Company (to be
shared between them based upon an allocation of Mr. Schimberg's duties
and responsibilities as determined on or before April 1, 2000) which
payments will be in addition to any fees Mr. Schimberg earns for
service on the Company's Board of Directors or on the boards of
directors of other Coca-Cola bottling companies.
(d) For the period during which Mr. Schimberg is
providing Consulting Services, Mr. Schimberg and his eligible
dependents to be eligible to participate in the Company's Executive
Retiree Medical Plan, which plan shall provide the same medical
benefits (and on the same basis) as provided under the medical plan
covering active nonunion employees of the Company, as it may be
amended from time to time; and Mr. Schimberg to be eligible to
participate in the Company's financial planning and tax benefit plans
on the same basis as other eligible employees.
(e) Mr. Schimberg to act as an independent contractor in
the performance of Consulting Services, responsible for payment of all
taxes including federal, state and local taxes arising out of such
services.
<PAGE> 3
(f) The Company or The Coca-Cola Company to provide Mr.
Schimberg with an office and secretary in its corporate offices in
order to assist him in the performance of his Consulting Services.
(g) The Company and/or The Coca-Cola Company to
reimburse Mr. Schimberg for all expenses incurred in connection with
the performance of Consulting Services.
8. Termination of Agreement. This Agreement shall terminate
upon Mr. Schimberg's death, disability or the existence of circumstances
constituting a termination for "cause," as hereinafter defined. In the event of
such termination, the Company shall pay to Mr. Schimberg or his estate all
amounts owed and payable to him under this Agreement as of the date of such
termination. For purposes of this Section 8, "cause" shall mean Mr. Schimberg's
willful failure or inability to carry out his duties and responsibilities in
any material respect, the commission of a felony or commission of any willful
and intentional, unprofessional or unethical act which has or would have, if
such act becomes public knowledge, a substantial and adverse effect on the
business operations or reputation of the Company.
9. Non-Competition; Confidentiality. For a period of two years
from the date of termination or expiration of the Employment Period or
termination or expiration of the consulting agreement described in Section 7
(whichever is the latter to occur), Mr. Schimberg shall not, directly or
indirectly engage in, participate in or have any interest as a consultant,
partner, joint venture, proprietor, employee, officer, director, agent,
security holder, creditor or consultant, or in any other capacity, or have any
other direct or indirect financial interest in any business, firm, person,
partnership, corporation (other than the Company or The Coca-Cola Company)
engaged in any activity similar to or competitive with any activity now engaged
in by the Company or The Coca-Cola Company, including, but not limited to,
manufacturing, producing or distributing liquid, nonalcoholic beverages in any
geographic area in which the Company or The Coca-Cola Company or any licensee
of The Coca-Cola Company has operations during or at the conclusion of the
Employment Period or period during which Consulting Services are provided
pursuant to Section 7 (whichever is the latter to occur); except nothing herein
shall be deemed to prevent or limit the right of Mr. Schimberg to own capital
stock or other securities of any corporation, the securities of which are
publicly owned or regularly traded in the over-the-counter market or on any
securities exchange, provided that Mr. Schimberg does not acquire beneficial
ownership (as determined under Rule 13d-3 of the Securities Exchange Act of
1934) of more than one percent of the issuer's outstanding securities of that
class.
10. Enforcement.
(a) The parties recognize that the nature of the subject
matter of this Agreement, including Section 9, would make it
impracticable and extremely difficult to determine actual damages to
the Company in the event of a breach of this Agreement by Mr.
Schimberg. Accordingly, if Mr. Schimberg commits a breach or threatens
to commit a breach of any of the provisions of this Agreement, the
Company shall have the right and remedy to have the provisions of the
Agreement specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened
<PAGE> 4
breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. The rights
of the Company to equitable relief in the enforcement of this
Agreement shall be in addition to any and all other remedies available
through an action in law.
(b) If any of the covenants contained in Section 9, or
any part thereof, are held to be unenforceable because of the duration
of such provisions or the area covered thereby, the undersigned agree
that the court making such determination shall have the power to
reduce the duration and the area or both of any such provision and, in
its reduced form, said provision shall then be enforceable.
(c) Should any other portion of this Agreement be
declared invalid for any reason or to have ceased to have been binding
on the parties hereto, said provision shall be severed and all other
provisions shall continue to be effective and binding.
(d) Notwithstanding anything herein to the contrary, the
Company shall not be relieved of any of its obligations hereunder to
Mr. Schimberg in the event of determination by any court, arbitrator,
or other governing authority that the covenants contained in Section 9
are unenforceable or to limit the enforceability of any such
covenants.
11. Binding Effect and Assignment. This Agreement benefits and
binds the Company and Mr. Schimberg and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
Notwithstanding the foregoing, and except as contemplated by Section 7, the
parties shall not be entitled to assign this Agreement or rights hereunder
without the prior written consent of the other party; provided however, that at
any time following commencement of the Consulting Services under Section 7, Mr.
Schimberg may assign his rights under this Agreement to a corporation,
partnership or limited liability company controlled by Mr. Schimberg, subject
to the condition that all services and other duties and responsibilities shall
be performed solely by Mr. Schimberg.
12. Headings; Definitions. The headings of sections contained in
this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof. The parties agree to all definitions in the
statement of parties to this Agreement and in the other introductory language
to this Agreement.
13. Controlling Law; Amendment; Waiver. This Agreement shall be
governed by the laws of the State of Georgia. This Agreement may not be altered
or amended except in writing signed by the parties. The failure of any party
hereto at any time to require performance of any provisions hereof shall in no
manner affect the right to subsequently enforce the same. No waiver by any
party hereto of any condition, or of the breach of any term, provisions,
warranty, representation, agreement or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed
or construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition or of the breach of any other term,
provision, warranty, representation, agreement or covenant herein contained.
14. Entire Agreement. This Agreement constitutes the entire
<PAGE> 5
understanding and agreement between the Company and Mr. Schimberg with respect
to the subject matter hereof and supersedes all prior negotiations,
understandings and agreements, whether written or oral, between the Company and
Mr. Schimberg with respect to the subject matter hereof.
HENRY A. SCHIMBERG COCA-COLA ENTERPRISES INC.
/s/ HENRY A. SCHIMBERG
By: /s/ JOHN L. CLENDENIN
- --------------------------------- -----------------------------------
Title: Chairman Compensation Committee
--------------------------------
April 27, 1998
- --------------------------------- --------------------------------------
Date Date
<PAGE> 6
APPENDIX A
Coca-Cola Enterprises Inc.
Stock Option Grant Agreement
Pursuant to the terms of the Employment Agreement, effective April 17,
1998, between Coca-Cola Enterprises Inc. (the "Company") and Henry A. Schimberg
("Optionee") and the 1997 Coca-Cola Enterprises Inc. Stock Option Plan, the
Company hereby grants to Optionee 600,000 stock options, subject to the terms
and conditions set forth below (herein referred to as the "April 1998 Option
Grant").
1. The April 1998 Option Grant will be divided into five
separate grants, each with an exercise price that reflects a performance goal
of an approximate 15% annual growth in the fair market value of the Company's
stock, measured from April 17, 1998, the date of grant. The fair market value
of the Company's stock (determined as the average of the high and low trading
prices) on April 17, 1998 was $39.8438.
2. The April 1998 Option Grant entitles you to purchase:
120,000 shares at $45.8204 ("Grant 1")
120,000 shares at $52.6935 ("Grant 2")
120,000 shares at $60.5975 ("Grant 3")
120,000 shares at $69.6871 ("Grant 4")
120,000 shares at $80.1402 ("Grant 5")
3. As long as you are performing the services required by the referenced
Employment Agreement and the consulting agreement contemplated in Section 7
therein, the options of the April 1998 Option Grant vest (become exercisable)
in accordance with the following schedule:
<TABLE>
<CAPTION>
Vesting Date Total Options Each of Grant 1-5's
Vesting Vesting
------------- -------------- --------------------
<S> <C> <C>
April 1, 2000 300,000 60,000
April 1, 2001 100,000 20,000
April 1, 2002 100,000 20,000
April 1, 2003 100,000 20,000
</TABLE>
Example: Assuming the continued service requirement has been satisfied as of
April 1, 2000, the following portions of the April 1998 Option Grant will be
exercisable: 60,000 of Grant 1, 60,000 of Grant 2, 60,000 of Grant 3, 60,000 of
Grant 4, and 60,000 of Grant 5, for a total of 300,000 vested options. Assuming
the continued service requirement is satisfied as of April 1, 2001, an
additional 20,000 options from each of Grants 1 though 5 will vest, a total of
100,000 additional options.
4. If, for any reason, Optionee does not continue to provide
employment and/or consulting services though April 1, 2003, any options which
have not vested as of the date on which such services cease shall be forfeited.
However, any options which are vested as of the date Optionee ceases to provide
such services will remain exercisable until they expire, as described below.
5. The options granted in the April 1998 Option Grant expire at
the close of business April 1, 2008.
<PAGE> 7
SECURITIES LAW RESTRICTIONS
Because of certain restrictions under the federal securities laws, under no
circumstances should options held by an executive officer of the Company be
exercised without consultation with the General Counsel's office concerning any
restrictions which apply.
THE ABOVE AGREEMENT IS A SUMMARY OF A GRANT MADE UNDER THE COMPANY'S
1997 STOCK OPTION PLAN (THE PLAN), THE TERMS OF WHICH ARE
INCORPORATED BY REFERENCE INTO THIS DOCUMENT. IN THE EVENT OF A
CONFLICT BETWEEN THE PLAN AND THIS AGREEMENT, THE TERMS OF THE PLAN
CONTROL. PLEASE NOTE THAT THE COMPANY'S BOARD OF DIRECTORS OR
COMPENSATION COMMITTEE MAY INTERPRET THE PLAN, TERMINATE THE PLAN, OR
AMEND ITS PROVISIONS, WITHOUT THE APPROVAL OF SHARE OWNERS, UNLESS
SUCH ACTION WOULD ADVERSELY AFFECT OPTIONS PREVIOUSLY GRANTED, OR
RAISE LEGAL CONCERNS UNDER SECURITIES OR TAX LAWS. YOUR SIGNATURE OF
ACCEPTANCE OF THE AWARDS OF STOCK OPTIONS ALSO CONSTITUTES YOUR
ACCEPTANCE OF THE TERMS AND CONDITIONS OF THE PLAN.
COCA-COLA ENTERPRISES IS THE PLAN ADMINISTRATOR
WHOSE FUNCTION IS TO ENSURE THE PLAN IS MANAGED
ACCORDING TO ITS RESPECTIVE TERMS AND CONDITIONS.
QUESTIONS PERTAINING TO THE PLAN SHOULD BE
DIRECTED TO:
COCA-COLA ENTERPRISES INC.
CORPORATE COMPENSATION
P.O. BOX 723040
ATLANTA, GA 31139-0040
(770) 989-3000
Please acknowledge below your acceptance of the terms of your April 1998 Option
Grant.
Accepted:
/S/ HENRY A. SCHIMBERG
- --------------------------------
Signature
- --------------------------------
Date
<PAGE> 1
EXHIBIT 10.25
COCA-COLA ENTERPRISES INC.
STOCK DEFERRAL PLAN
(Effective July 1, 1998)
<PAGE> 2
ARTICLE I
PURPOSE
1.1. Purpose. The purpose of the Coca-Cola Enterprises Inc. Stock Deferral
Plan is to provide a select group of management and highly compensated employees
the opportunity to enhance their retirement security by deferring the receipt of
stock otherwise issuable upon the exercise of stock options granted under the
Company's Stock Option Program.
1.2. Effective Date. Established pursuant to the authority of the
Compensation Committee of the Company's Board of Directors, the effective date
of the Plan is July 1, 1998.
ARTICLE II
DEFINITIONS
2.1. "Account" means a Participant's interest under the Plan. Each Account
shall be composed of Share Unit Account and a Cash Credit Account. A
Participant's Account shall be reflected as a book reserve entry in the
Company's accounting records.
2.2. "Beneficiary" means the person or persons last designated by a
Participant, in writing, as entitled to receive such Participant's interest
under the Plan in the event of his death. If all designated Beneficiaries
predecease the Participant or the Participant fails to designate a Beneficiary,
the Beneficiary shall be the estate of the Participant. Notwithstanding the
foregoing, if the Participant designates his spouse as a Beneficiary, such
designation will be void upon the divorce of the Participant and the former
spouse unless, or until, the Participant again designates the former spouse as a
Beneficiary.
2.3. "Cash Credit" means the unit for measuring the value of the
fractional Profit Shares deferred under the Plan, as well as Hypothetical
Dividends and Interest Credits. Cash Credits represent the future right to
the distribution of cash.
2.4. "Cash Credits Account" means the account under which a Participant's
Cash Credits are recorded.
2.5. "Committee" means the committee appointed, pursuant to Section 6.1,
to administer the Plan.
2.6. "Company" means Coca-Cola Enterprises Inc., a Delaware corporation.
2.7. "Deferral Election" means a Participant's election, pursuant to
Article III, to defer the receipt of Stock upon the exercise of an Option.
2.8. "Cash Credits Conversion Date" means the first trading day of each
year.
2.9. "Employee" means any common-law employee of the Company or a
Subsidiary.
2.10. "Eligible Optionee" means an individual who holds an Option who, at
the time of making a Deferral Election, is an Employee of the Company or
Subsidiary and who is determined to be
<PAGE> 3
eligible for participation in the Plan by the Committee.
2.11. "Exercise Date" means the date on which an exercise of any Option
that is the subject of a Deferral Election is effected by the Company, which
date shall be specified by the Participant in the Deferral Election. In the
event the Exercise Date specified by the Participant is not a trading day on the
New York Stock Exchange, the Exercise Date will be the immediately preceding
date that is a trading date.
2.12. "Fair Market Value" means the average of the high and low trading
prices on a given trading date.
2.13. "Hypothetical Dividends" means an amount that equals the amount of
dividends paid on the Stock, which amount is determined as if the Share Units
credited to a Participant's Share Unit Account were outstanding shares of Stock
on the record date of any such dividend.
2.14. "Interest Credits" means an amount described in Section 4.2(c), which
amount is based on the annual rate equivalent to the weighted average prime
lending rate of SunTrust Bank, Atlanta for the relevant year or portion of the
year.
2.15. "Option" means any option to purchase shares of Stock (i) that was
granted to the Optionee under the Company's Stock Option Program and (ii) that
will, by its terms, expire as of a date that is not more than three years after
the date on which the relevant Deferral Election is received by the Company.
2.16. "Participant" means any Eligible Optionee who has made a Deferral
Election under the Plan. An individual or former Employee who has an interest
under the Plan shall also be considered a Participant, even though such
individual is, for any particular Plan Year, ineligible to make a Deferral
Election.
2.17. "Plan" means the Coca-Cola Enterprises Inc. Stock Deferral Plan, as
it may be amended from time to time.
2.18. "Profit Shares" means the number of shares of Stock the Participant
would otherwise be eligible to receive upon the exercise of an Option when the
exercise price is satisfied with the delivery of Stock. Specifically, the number
of Profit Shares received upon such an exercise equals the difference between
the number of shares subject to an Option and the number of shares that, in the
aggregate, have a Total Market Value equal to the exercise price of an Option.
Any amount realized upon such an exercise that would not represent a whole share
of Stock is described herein as a fractional Profit Share.
2.19. "Stock Ownership Affidavit" means a notarized affidavit under which a
Participant attests to the ownership of Stock for purposes of satisfying the
exercise price of an Option subject to a Deferral Election.
2.20. "Share Unit" means the unit measuring the Profit Shares deferred
under the Plan, with each such unit representing the future right to the
distribution of one whole share of Stock.
2.21. "Stock" means shares of common stock of Coca-Cola Enterprises Inc.
<PAGE> 4
2.22. "Share Unit Account" means the account under which a Participant's
Share Units are credited.
2.23. "Stock Option Program" means any stock option plan established and
maintained by Coca-Cola Enterprises Inc. that permits the deferral of Stock
pursuant to this Plan.
2.24. "Street Name" means a share owner of record that is a financial
institution, brokerage firm that holds Stock on behalf of a Participant.
2.25. "Subsidiary" means any corporation or other business organization in
which Coca-Cola Enterprises Inc. owns, directly or indirectly, 25% or more of
the voting stock or capital.
2.26. "Total Market Value" means the aggregate value of all Stock
identified in a Stock Ownership Affidavit, which value equals the sum of the
Fair Market Value of all such Stock.
ARTICLE III
DEFERRAL ELECTIONS
3.1. Deferral Election. An Eligible Optionee may elect to defer the
receipt of Profit Shares to which he would otherwise be entitled upon exercise
of an Option if the requirements of Section 3.2 are satisfied.
3.2. Deferral Election Requirements. A Deferral Election will be effective
only if the following requirements are satisfied:
(a) The Participant must complete a Deferral Election Form, attached
hereto as Appendix A, and return it to the Company not less than
six months prior to the Exercise Date applicable to the Option.
(b) The Participant must deliver to the Company, not less than 10
business days prior to the Exercise Date, a Stock Ownership
Affidavit, attached hereto as Appendix B, which affidavit (i)
must specifically identify Stock that has been owned by the
Participant, as share owner of record or in Street Name, for at
least six months prior to the Exercise Date of the Option
subject to a Deferral Election; and (ii) must identify Stock
with a Total Market Value on the Exercise Date equal to, or in
excess of, the exercise price of all Options subject to the
relevant Deferral Election.
3.3. Irrevocability of Election. A Participant's Deferral Election may not
be revoked once made. The following restrictions, shall also apply to an Option
subject to the Deferral Election:
(a) An Option subject to a Deferral Election shall not be
exercisable during the Period between the date on which the D
Deferral Election is delivered to the Committee and the Exercise
Date applicable to such Option.
(b) Notwithstanding any provision to the contrary, if the Total
Market Value of the Stock presented
<PAGE> 5
under the Stock Ownership Affidavit is not sufficient to satisfy
the exercise price of all Options subject to the Deferral
Election, the Company shall effect the exercise of the number of
Options for which the Stock Ownership Affidavit is sufficient to
satisfy the exercise price, effecting the exercise of Options
with the lowest exercise prices first. In the event of a partial
exercise pursuant to this Section 3.3, any Option that is not
exercised because the exercise price was not satisfied under the
relevant Stock Ownership Affidavit will be forfeited as of the
Exercise Date.
3.4. Nonrecognition of a Deferral Election. Notwithstanding anything in
this Plan to the contrary, a Deferral Election shall not be recognized by the
Company in the event of the Participant's termination of employment, for any
reason, prior to the Exercise Date specified in such Deferral Election unless
the Participant has elected to receive a distribution of his Account at least 12
months after the Exercise Date.
ARTICLE IV
ACCOUNT ACCRUALS
4.1. Share Unit Account. A Participant's interest in his Share Unit Account
shall be determined as follows:
(a) Upon the exercise of an Option subject to a Deferral Election, a
Participant's Share Unit Account will be increased by the number
of Share Units equal to the number of whole Profit Shares the
Participant would have received upon exercise of the Option if it
had not been subject to a Deferral Election.
(b) On each Cash Credits Conversion Date, a Participant's Share Unit
Account will also be increased by the number of Share Units equal
to the number of whole shares of Stock that could be purchased
with funds equal to the balance of the Participant's Cash Credits
Account on such date. The Fair Market Value of the Stock on the
Cash Credits Conversion Date shall be used to determine the
number of shares that could be purchased.
4.2 Cash Credits Account. A Participant's interest in his Cash Credits
Account shall be determined as follows:
(a) Upon the exercise of an Option subject to a Deferral Election, a
Participant's Cash Credits Account will be increased by an amount
equal to the Fair Market Value of any fractional Profit Share the
Participant would have received upon exercise of the Option if it
had not been subject to a Deferral Election.
(b) On each of the Company's dividend record dates, a Participant's
Cash Credits Account will be increased by an amount equal to the
Hypothetical Dividends with respect to Participant's Share Unit
Account balance.
<PAGE> 6
(c) At the end of each calendar year, or as of any other date
designated by the Committee, a Participant's Cash Credits Account
will be increased by Interest Credits, determined with respect to
the average daily balance of the Cash Credits Account during such
year or relevant portion of the year.
(d) On each Cash Credits Conversion Date, a Participant's Cash
Credits Account will be decreased by an amount equal to the funds
required to purchase the maximum number of whole shares of Stock
on such date if the account were actual funds. The Fair Market
Value of the Stock on the Cash Credits Conversion Date shall be
so used to determine the number of shares that could be
purchased.
4.3. Nonforfeitability of Accounts. A Participant's interest in the value
of his Account shall at all times be 100% nonforfeitable.
ARTICLE V
DISTRIBUTIONS
5.1. Form of Payment of Account. A Participant's interest under his Share
Unit Account shall be distributed in whole shares of Stock, and the value of his
Cash Credits Account shall be distributed in cash.
5.2. Commencement of Distribution. At the time a Participant first makes a
Deferral Election he shall elect whether distribution of his Account shall
commence (i) in the calendar year following the year in which his or her
employment terminates, (ii) as of the Participant's attaining a specific age, or
(iii) as of the later of (i) and (ii). A Participant may change, at any time,
his election regarding the commencement of the distribution of his Account;
provided however, any such change will not become effective for one year or more
after the date of the subsequent election. In the event a Participant fails to
make an election with respect to the commencement of payment of his Account,
distribution to such Participant shall be made as soon as practicable following
his termination of employment.
5.3. Form of Distribution. Prior to commencement of participation in the
Plan, a Participant shall elect whether to receive distributions under the Plan
as (i) a single-sum payment, or (ii) a series of substantially equal quarterly,
semiannual, or annual installments over a period of 2 to 10 years. A Participant
may change, at any time, his election regarding the manner of the distribution
of his Account; provided, however, any such change will not become effective for
one year after the date of the subsequent election. In the event a Participant
fails to make an election with respect to the manner of distribution, payment
will be made in the manner determined by the Committee.
5.4. Distributions on Account of Death. In the event of the death of a
Participant prior to distribution of the total balance of his Account,
distribution of the balance of such Account shall be made to the Participant's
Beneficiary in a
<PAGE> 7
single-sum payment as soon as practicable following the death of such
Participant.
5.5. Distribution on Account of Financial Hardship. In the event a
Participant has a financial hardship due to an unforeseeable emergency (as
determined by the Committee), the Committee, in its sole discretion, may
distribute all or any portion of the Participant's Account.
ARTICLE VI
ADMINISTRATION
6.1. Plan Administration. The Plan shall be administered by the Stock
Deferral Plan Committee, which shall consist of at least three members appointed
by the Company.
6.2. Committee Action. Action of the Committee may be taken with or without
a meeting of its members; provided, however, that any action shall be taken only
upon the vote or other affirmative expression of a majority of Committee members
qualified to vote with respect to such action. If a member of the Committee is a
Participant in the Plan, he shall not participate in any decision which solely
affects his own Account under the Plan.
6.3. Rights and Duties of Committee. The Committee shall administer the
Plan and shall have all powers necessary to accomplish that purpose, including,
but not limited to, construing, interpreting, and administering the Plan. The
decisions of the Committee shall be final and binding on all parties.
6.4. Taxes. If all or any portion of a Participant's Account shall become
liable for the payment of any estate, inheritance, or other tax which the
Company shall be required to pay or withhold upon distribution of the
Participant's account, the Company shall have the full power and authority to
withhold distribution of the Participant's Account until the Participant makes
appropriate arrangements with the Company to satisfy such liability. In the
event the Participant is liable for any tax prior to a distribution under the
Plan, the Company shall be entitled to satisfy such liability from any other
funds owed by the Company to the Participant.
ARTICLE VII
CLAIMS PROCEDURE
7.1. Claims for Benefits Under Plan. If a Participant or Beneficiary does
not receive the benefits that he believes are due under the Plan, he may make a
claim for such benefits to the Committee. Any such claim for benefits must be in
writing and addressed to the Committee or to the Company. If the Participant's
or Beneficiary's claim is denied, the Committee shall notify the Participant or
Beneficiary in writing within ninety days after receipt of the claim. However,
if special circumstance require an extension of time for processing the claim,
the Committee shall provide notice of the extension to the Participant or
Beneficiary prior to the termination of the initial ninety-day period, and such
extension shall not exceed one additional, consecutive ninety-day period. Any
notice of a denial of the payment under the Plan shall inform the Participant or
Beneficiary of the basis for the denial, any additional
<PAGE> 8
material or information necessary to perfect such claim, and the steps which
must be taken to have such claim reviewed.
7.2. Appeals. Each Participant or Beneficiary whose claim under the Plan
has been denied may file a written request for review of his claim with the
Committee. The request for review must be filed within sixty days after the
Participant or Beneficiary receives the written notice denying his claim. The
final decision of the Committee will be made within sixty days after receipt of
the request for review and shall be communicated in writing, setting forth the
basis for the Committee's decision. If there are special circumstances which
require an extension of time for completing the review, the Committee's decision
shall be rendered not later than one-hundred twenty days after the receipt of
the request for review.
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1. Amendment. The Company shall have the right to amend the Plan in whole
or in part at any time; provided, however, that no amendment shall reduce the
amount credited to any Participant's Account as of the later of the date such
amendment is adopted or effective. Any amendment shall be in writing and
executed by a duly authorized officer of the Company.
8.2. Termination. The Company reserves the right to discontinue and
terminate the Plan at any time, in whole or in part, for any reason. In the
event of termination of the Plan, the amounts credited to any Participant's
Account, as of the effective date of such termination, shall not be reduced and
shall be distributed at a time and in the manner solely determined by the
Committee.
ARTICLE IX
MISCELLANEOUS
9.1. Limitation on Participant's Rights. Participation in this Plan shall
not give any Participant the right to be retained in the Company's employ or any
rights or interest in this Plan or any assets of the Company other than as
herein provided. The Company reserves the right to terminate the employment of
any Participant without any liability for any claim against the Company under
this Plan, except to the extent provided herein.
9.2. Participants' Interest Unfunded. All amounts payable under the Plan to
Participants shall be payable from the general assets of the Company. Nothing
contained herein shall require the Company to set aside or hold in trust any
amounts or assets for the purpose of paying benefits. Participants shall have
the status of general unsecured creditors of the Company with respect to amounts
they defer under the Plan or any other obligation of the Company to pay
Participants' interests pursuant hereto. Any funds of the Company available to
pay benefits under the Plan shall be subject to the claims of general creditors
of the Company and may be used for any purpose by the Company.
9.3. Other Plans. This Plan shall not affect the right of any Participant
to participate in and receive benefits under any employee benefit plans which
are now or hereafter maintained by the Company, unless the terms of such other
employee benefit plan or plans specifically provide otherwise.
<PAGE> 9
9.4. Governing Law. This Plan shall be construed, administered, and
governed in all respects in accordance with applicable federal law and, to the
extent not preempted by federal law, in accordance with the laws of the State of
Georgia. If any provisions of this instrument shall be held by a court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions
hereof shall continue to be fully effective.
9.5. Gender, Number, and Headings. In this Plan, whenever the context so
indicates, the singular or plural number and the masculine, feminine, or neuter
gender shall be deemed to include the other. Headings and subheadings in this
Plan are inserted for convenience of reference only and are not considered in
the construction of the provisions hereof.
9.6. Successors and Assigns; Nonalienation of Benefits. This Plan shall
inure to the benefit of, and be binding upon, the parties hereto and their
successors and assigns; provided, however, that the amounts credited to the
Account of a Participant shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge,
garnishment, execution or levy of any kind, either voluntary or involuntary, and
any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge or otherwise dispose of any right to any benefits payable hereunder shall
be void, including, without limitation, any assignment or alienation in
connection with a separation, divorce, child support or similar arrangement.
<PAGE> 1
EXHIBIT 10.35
SUPPLEMENTAL AGREEMENT
TO THE BOTTLER'S AGREEMENT
This Supplemental Agreement (the "Supplemental Agreement") is entered into with
effect from January 30, 1998, by and among The Coca-Cola Company and The
Coca-Cola Export Corporation (hereinafter collectively or severally referred to
as the "Company") and S.A. Coca-Cola Beverages Belgium N.V., Coca-Cola
Entreprise, Coca-Cola Production, S.A., Coca-Cola Beverages Nederland B.V.,
Coca-Cola & Schweppes Beverages Limited, and Soutirages Luxembourgeois S.A.
(hereinafter collectively or severally referred to as the "Bottler(s)").
WHEREAS, each Bottler has entered into a Bottler's Agreement with the Company
effective July 26, 1996 except that the Bottler's Agreement between Coca-Cola &
Schweppes Beverages Limited and the Company is effective February 10, 1997, and
the Bottler's Agreement between Soutirages Luxembourgeois S.A. and the Company
is effective January 30, 1998, (hereinafter collectively or severally referred
to as the "Bottler's Agreement(s)") concerning the preparation, packaging,
distribution and sale of certain non-alcoholic beverages under trademarks owned
by The Coca-Cola Company (hereinafter referred to as the "Beverages") packaged
in containers authorized in the Bottler's Agreements by The Coca-Cola Company
(hereinafter referred to as "Authorized Containers") and covering a territory
particularly described in each Bottler's Agreement (hereinafter collectively or
severally referred to as the "Territory(ies)");
WHEREAS, in an effort to maximize the beverage production and distribution
efficiencies of their respective industrial and commercial facilities, the
Bottlers desire to have the flexibility to: (1) exercise the production and/or
distribution rights under their Bottler's Agreement in the Territory(ies)
covered by any one or more of the other Bottler's Agreement(s); (2) exercise,
in their respective Territory, the production and/or distribution rights under
any one or more of the other Bottler's Agreement(s); and (3) allow each Bottler
to have any other Bottler manufacture, for the requesting Bottler, Beverages in
Authorized Containers listed in its respective Bottler's Agreement;
WHEREAS, subject to the terms of this Supplemental Agreement, the Company is
desirous to authorize each Bottler to prepare and package and/or distribute and
sell the Beverages in the Territory(ies);
NOW, THEREFORE:
1. In addition to the rights granted to each Bottler under Clause I of
each Bottler's Agreement to prepare, package, distribute and sell the
Beverages in Authorized Containers in and throughout a specific
Territory, each Bottler is hereby authorized to: a) prepare and
package and/or sell or distribute the Authorized Containers throughout
any one or more of the Territory(ies); b) prepare and package and/or
sell or distribute, in its respective Territory, the Authorized
Containers listed
<PAGE> 2
under any one or more of the other Bottler's Agreement(s); and c) have
any other Bottler manufacture for the requesting Bottler Beverages
authorized under the requesting Bottler's Bottler's Agreement.
2. Notwithstanding the provisions under 1) above, each Bottler shall,
throughout the duration of this Supplemental Agreement, be primarily
responsible to the Company for fulfilling all of its obligations under
the Bottler's Agreement it has entered into with the Company,
including but not limited to its obligation to prepare and present to
the Company once in each calendar year, a program (the "Annual
Program") which shall include but shall not be limited to the
marketing, management, financial, promotional and advertising plans of
the Bottler showing in detail the activities contemplated for the
ensuing twelve-month period or such other period as the Company may
prescribe, and which shall be acceptable to the Company as to form and
substance. The Bottler shall continue to prosecute diligently such
Annual Program and shall report quarterly or at such other intervals
as the Company may request in connection with the implementation of
the Annual Program. The Bottler shall also report on a monthly basis,
or at such other intervals as the Company may request, to the Company,
sales of each of the Beverages in each of the Territories and in such
detail and containing such information as may be requested by the
Company.
3. In addition, notwithstanding the provision under 1) above, no Bottler
shall be engaged in production, packaging, sale or distribution
activities in any of the other Bottlers' Territories (i) at the
expense of neglecting the development of the Company's Beverages in
the Territory defined in the Bottler's Agreement it has entered into
with the Company, and (ii) unless its obligations under the Bottler's
Agreement it has entered into with the Company are fulfilled to the
satisfaction of the Company.
4. Notwithstanding the foregoing, no Bottler shall initiate the
production, packaging, sale or distribution of any Beverage or any
Authorized Container in any Territory, which at such time is not
produced, packaged, sold or distributed within that Territory, without
the prior express agreement on a customer and consumer program
acceptable to the Company or its designated entity, for the Beverage
or Authorized Container in question.
5. Each Bottler shall comply with all applicable laws and regulations in
effect in any Territory where it produces, packages, sells or
distributes the Beverages.
6. It is the desire of the parties that this Supplemental Agreement
remain in force for the duration of the Bottler's Agreement(s).
However, the system of operation authorized under this Supplemental
Agreement is a new concept which has not been implemented by the
Company with independent entities before. It is therefore possible
that unforeseen difficulties may arise in its application. The Company
therefore retains the rights to (i) withdraw selectively the
authorization of any of the
<PAGE> 3
Bottlers to operate in the Territories of the others; or (ii)
terminate this Supplemental Agreement at any time during its validity
by giving the Bottlers ninety (90) days' prior written notice of its
intention to terminate.
7. This Supplemental Agreement shall be interpreted, construed and
governed by and in accordance with the laws of Belgium. Any dispute
arising hereunder shall be referred to the courts of Brussels.
Except as herein modified, the Bottler's Agreements and all of their
stipulations, covenants, agreements, terms, conditions and provisions shall
remain in full force and effect.
IN WITNESS WHEREOF, The Coca-Cola Company, The Coca-Cola Export Corporation,
S.A. Coca-Cola Beverages Belgium N.V., Coca-Cola Entreprise, Coca-Cola
Production S.A., Coca-Cola Beverages Nederland B.V., Coca-Cola & Schweppes
Beverages Limited and Soutirages Luxembourgeois S.A. have caused this
Supplemental Agreement to be signed and acknowledged by their duly qualified
representative.
THE COCA-COLA COMPANY THE COCA-COLA EXPORT
CORPORATION
S/ WILLIAM J. DAVIS S/ DAVID M. TAGGART
By: By:
---------------------------- ----------------------------
Authorized Representative Authorized Representative
Date: June 30, 1998 Date: July 7, 1998
S.A. COCA-COLA BEVERAGES COCA-COLA ENTREPRISE
BELGIUM N.V.
S/ JOHN R. PARKER, JR. S/ DOMINIQUE REINICHE
By: By:
---------------------------- ----------------------------
Authorized Representative Authorized Representative
Date: 15 July 1998 Date: 4 August 1998
COCA-COLA PRODUCTION S.A. COCA-COLA BEVERAGES
NEDERLAND B.V.
By: S/ DOMINIQUE REINICHE By: S/ FRANK GOVAERTS
---------------------------- ----------------------------
Authorized Representative Authorized Representative
4 August 1998 July 22, 1998
Date: ------------------------- Date: -------------------------
COCA-COLA & SCHWEPPES SOUTIRAGES LUXEMBOURGEOIS S.A.
BEVERAGES LIMITED
By: S/ P.D. MEADOWS By: S/ JOHN R. PARKER, JR.
---------------------------- ----------------------------
Authorized Representative Authorized Representative
Date: 15 July 1998 Date: 15 July 1998
-------------------------- --------------------------
<PAGE> 1
EXHIBIT 12
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
COCA-COLA ENTERPRISES INC.
(In millions except ratios)
FISCAL YEAR
------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Computation
of Earnings:
Earnings
from
continuing
operations
before
income
taxes and
cumulative
effect of
accounting
changes $ 169 $ 178 $ 194 $ 145 $ 127
Add:
Interest
expense 706 532 332 319 314
Amortization
of
capitalized
interest 2 2 2 1 1
Amortization
of debt
premium/
discount 27 25 23 12 2
Interest
portion
of rent
expense 28 27 12 10 9
-------- -------- -------- -------- --------
Earnings
as adjusted $ 932 $ 764 $ 563 $ 487 $ 453
======== ======== ======== ======== ========
Computation
of Fixed
Charges
and
Combined
Fixed Charges
and
Preferred
Stock
Dividends:
Interest
expense $ 706 $ 532 $ 332 $ 319 $ 314
Capitalized
interest 7 2 2 4 3
Amortization
of debt
premium/
discount 27 25 23 12 2
Interest
portion
of rent
expense 28 27 12 10 9
-------- -------- -------- -------- --------
Fixed
Charges 768 586 369 345 328
Preferred
stock
dividends (a) 2 2 13 3 3
-------- -------- --------- -------- --------
Combined
Fixed
Charges
and
Preferred
Stock
Dividends $ 770 $ 588 $ 382 $ 348 $ 331
======== ======== ======== ======== ========
Ratio of
earnings
to fixed
charges 1.21 1.30 1.53 1.41 1.38
======== ======== ======== ======== ========
Ratio of
earnings
to
combined
fixed
charges
and
preferred
stock
dividends 1.21 1.30 1.47 1.40 1.37
======== ======== ======== ======== ========
(a) Preferred stock dividends have been increased to an amount representing the
pretax earnings which would be required to cover such dividend requirements.
<PAGE> 1
EXHIBIT 13
COCA-COLA ENTERPRISES INC.
1998 Financial Report
Management's Financial Review 18
Consolidated Statements of Income 21
Consolidated Statements of Cash Flows 23
Consolidated Balance Sheets 25
Consolidated Statements of Share-Owners' Equity 26
Notes to Consolidated Financial Statements 30
Report of Management 45
Report of Independent Auditors 45
Selected Financial Data 46
<PAGE> 2
COCA-COLA ENTERPRISES INC.
- --------------------------------------------------------------------------------
MANAGEMENT'S FINANCIAL REVIEW
Management's Financial Review should be read in
conjunction with the cautionary statements and the Company's consolidated
financial statements and accompanying footnotes.
- --------------------------------------------------------------------------------
OUR PRIMARY OBJECTIVE:
TO DELIVER A SUPERIOR INVESTMENT RETURN TO OUR SHARE OWNERS
THROUGH CONSISTENT INCREASES IN LONG-TERM OPERATING
CASH FLOWS AND PROFITABLE INCREASES IN
SALES VOLUME.
Achieving this objective requires our commitment to innovative and superior
marketplace execution through a decentralized operating philosophy. This
philosophy has allowed us to successfully capitalize on the diverse
opportunities in various markets and channels and effectively
integrate our international and domestic territories. Since 1986
we have invested in numerous bottling operations in various
territories for a total cost of approximately $13 billion.
In 1998 we announced a 3 1/2 year, $5 billion Capital
Spending Plan to allow us to continue our channel
initiatives, including cold drink, and to make
infrastructure investments required to support the
continued growth we are experiencing.
- --------------------------------------------------------------------------------
BUILDING ON OUR BUSINESS
Coca-Cola Enterprises Inc. is the world's largest marketer, distributor, and
producer of bottle and can liquid nonalcoholic refreshment. The Company
distributes its bottle and can products to customers and consumers in the United
States and Canada through franchise territories in 46 states in the United
States, the District of Columbia, and in the 10 provinces of Canada. 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. Products of The
Coca-Cola Company account for approximately 90% of our total product sales
volume. This reflects the successful partnership we have with The Coca-Cola
Company, which currently owns approximately 40% of our outstanding common
shares.
Our position as the leader in the worldwide liquid nonalcoholic
refreshment business is enhanced by our ongoing acquisition program. This is
reflected in volume increases well ahead of industry rates in both the Company's
European and North American markets. We achieved consistent growth in cash
operating profit despite the challenging operating environment in 1998. This is
an indication of the Company's ability to 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 costs.
18
<PAGE> 3
COCA-COLA ENTERPRISES INC.
- --------------------------------------------------------------------------------
INVESTING FOR THE FUTURE
Our long-term focus on business reinvestment allows us to maintain and
accelerate our current operating momentum in what we believe will continue to be
a highly competitive market. While directing our cash resources toward
profitable high-return projects, we will capitalize on opportunities in our
European and North American territories. In order to maintain growth levels
significantly higher than industry rates, we must invest in fleet, warehouse,
and production capacity. At the same time, we will continue to direct capital to
the many opportunities in the highly profitable segments of our business,
including cold drink channels. Our Capital Spending Plan was designed to create
the foundation for long-term growth in our financial and operating results as we
move into the next millennium. We expect to produce 1999 cash operating profit
growth of 12% above 1998 comparable results of just over $2 billion, even as we
continue our significant capital investments.
- -------------------------------------------------------------------------------
CAUTIONARY STATEMENTS
Certain expectations and projections regarding future performance of the Company
referenced in this Annual Report are forward-looking statements. 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 certain future events and uncertainties. We caution readers that in
addition to the important factors described elsewhere in this Annual Report, the
following factors, among others, could cause the Company's actual consolidated
results in 1999 and thereafter to differ significantly from those expressed in
any forward-looking statements.
MARKETPLACE - The Company's response to continued and increased customer and
competitor consolidations and marketplace competition may result in lower than
expected net pricing of our products. In addition, competitive pressures may
cause channel and product mix shifts away from more profitable cold drink
channels and packages and adversely affect the Company's overall pricing. Also,
weather conditions, particularly in Europe, can have a significant impact on the
Company's sales volume. Net pricing, volume, and costs of sales are the primary
determinants of net earnings.
FUNDING FROM THE COCA-COLA COMPANY - Material changes in levels of funding
historically provided under various programs with The Coca-Cola Company, or our
inability to meet the performance requirements for the anticipated levels of
such support payments, could adversely affect future earnings. The Coca-Cola
Company is under no obligation to continue past levels of funding.
RAW MATERIALS - Our forecast of earnings and cash operating profit assumes no
unplanned increases in the cost of raw materials, ingredients, packaging
materials, or supplies. If such increases occur, and the Company is unable to
increase its pricing to customers by comparable amounts, earnings and cash
operating profit would be adversely affected.
INFRASTRUCTURE INVESTMENT - Projected capacity levels of our infrastructure
investment may differ from actual if our volume growth does not continue as
anticipated. Significant changes from our expected timing of returns on cold
drink equipment and employee, fleet, and plant infrastructure investments could
adversely impact our future cash operating profit and net income.
YEAR 2000 COMPLIANCE - The Company's Year 2000 compliance project is dependent
on many factors including timely and successful compliance by our customers and
suppliers as well as adequate program changes from our software vendors. It is
also dependent upon our ability to manage the project so that the Year 2000
issue results in little impact to our business. The inability to conduct
business in certain areas because of the Year 2000 situation could have a
materially adverse impact on our operating results and financial condition.
EURO CONVERSION - Unexpected costs associated with our European operations
converting to the common European currency ("the euro") may adversely affect
future cash operating profit and net income.
FINANCING CONSIDERATIONS - Changes from our expectations regarding both interest
rates and currency exchange rates can have a material impact on our earnings. We
may not be able to mitigate completely the effect of significant interest rate
or currency exchange rate fluctuations.
19
<PAGE> 4
COCA-COLA ENTERPRISES INC.
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
OPERATIONS REVIEW 1998
- --------------------------------------------------------------------------------
OVERVIEW
In 1998 we achieved our objective of 10% comparable cash operating profit growth
through effective management of the volume, revenue, and cost components of our
business. The Company's comparable cash operating profit growth reflected volume
growth above industry rates in both our North American and European markets and
increases in net revenues per case that offset higher cost of sales per case.
To achieve our objective of increasing long-term value for our share owners,
we continue to invest additional capital to expand our geographic, product,
package, and channel diversity and to act on local market opportunities. In 1998
this diversity continued to be a key factor in our ability to deliver consistent
growth despite the highly competitive pricing environment in North America. With
approximately 25% of our net operating revenues generated in territories outside
North America, we believe our ability to manage our expanding portfolio of
diverse operations results in a significant competitive advantage and
accelerates our long-term growth potential.
COMPARABLE RESULTS - Because of the Company's significant acquisition activity,
results adjusted to a comparable basis provide a better indication of current
operating trends. Comparable operating results as presented in the Cash
Operating Profit and Net Operating Revenues and Cost of Sales discussions are
determined by adjusting:
- 1998 RESULTS to exclude the results of the 1998 acquisition of Coke
Southwest and
- 1997 RESULTS (i) to include the results of significant 1997 acquisitions
for the same periods included in 1998 reported results, and (ii) to
reflect 1998 currency translation rates.
CASH OPERATING PROFIT
Consolidated 1998 cash operating profit, or net income before deducting
interest, taxes, depreciation, amortization, and other nonoperating items
exceeded $1.9 billion, 19% above reported 1997 results and 10% above comparable
1997 performance. We are pleased with this performance considering the highly
competitive pricing conditions that continue to exist in our North American
territories and the poor weather conditions that persisted through most of 1998
in our European territories. Even with relatively low volume growth in Europe,
Europe's cash operating profit growth outpaced North America's in 1998. In 1998
currency translations reduced the comparable cash operating profit growth by
less than 1 percentage point.
In the opinion of management, cash operating profit is one of the key standards
for measuring our operating performance. Cash operating profit 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.
NET OPERATING REVENUES AND COST OF SALES
In 1998 net operating revenues were up 19% to $13.4 billion.
-------------------------
FULL-YEAR 1998
-------------------------
REPORTED COMPARABLE
CHANGE CHANGE
- --------------------------------------------------------------------------------
Net Revenues Per Case 1% 1.5%
Cost of Sales Per Case 1% 1%
- --------------------------------------------------------------------------------
Under our decentralized organizational and operating philosophy, net revenues
per case are managed locally, reflecting individual market conditions and
opportunities. Net operating revenues are comprised principally of wholesale
sales to retailers, accounting for approximately 97% of our net revenues.
The net revenues per case increase reflects the benefits of joint marketing and
promotional programs with The Coca-Cola Company along with favorable product,
package, and channel mix shifts and limited price increases experienced in
certain territories. Additionally, favorable packaging costs partially offset
ingredient cost increases.
VOLUME
Comparable volume information represents reported results adjusted to include
volume of 1998 and 1997 acquired companies for the same periods in 1997 as those
periods for which the entities were owned in 1998.
-------------------------
FULL-YEAR 1998
-------------------------
REPORTED COMPARABLE
CHANGE CHANGE
- --------------------------------------------------------------------------------
Physical Case Bottle and Can Volume:
Consolidated 18% 5%
North American Territories 6%
European Territories 2%
- --------------------------------------------------------------------------------
Volume growth in 1998 reflects strong performance of Coca-Cola classic, diet
Coke/Coca-Cola light, Sprite, Barq's, and the Company's noncarbonated
brand portfolio. In particular, Sprite demonstrated double-digit growth for the
fifth consecutive year. Our brands continue to capture the majority of
the nonalcoholic beverage per capita consumption growth as evidenced by our
growth that exceeded overall industry growth rates. On a unit case basis,
Europe represented 23% and 24% of the Company's 1998 and 1997 volume,
respectively. This change reflects our base volume and territory growth in North
America.
20
<PAGE> 5
COCA-COLA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
---------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------
(In millions except per share data) 1998 1997 1996
- --------------------------------------------------------------------------------
NET OPERATING REVENUES $ 13,414 $ 11,278 $ 7,921
Cost of sales (purchases from The
Coca-Cola Company - $3,697,
$3,086, and $2,150,
respectively) 8,391 7,096 4,896
- --------------------------------------------------------------------------------
GROSS PROFIT 5,023 4,182 3,025
Selling, delivery, and
administrative expenses 4,154 3,462 2,480
- --------------------------------------------------------------------------------
OPERATING INCOME 869 720 545
Interest expense, net 701 536 351
Other nonoperating (income)
expense, net (1) 6 --
- --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 169 178 194
Income tax expense before rate
change benefit 56 65 80
Income tax rate change benefit (29) (58) --
- --------------------------------------------------------------------------------
NET INCOME 142 171 114
Preferred stock dividends 1 2 8
- --------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON
SHARE OWNERS $ 141 $ 169 $ 106
- -----------------------------------------=======================================
BASIC NET INCOME PER SHARE
APPLICABLE TO COMMON SHARE OWNERS $ 0.36 $ 0.44 $ 0.28
- -----------------------------------------=======================================
DILUTED NET INCOME PER SHARE
APPLICABLE TO COMMON SHARE OWNERS $ 0.35 $ 0.43 $ 0.28
- -----------------------------------------=======================================
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
- --------------------------------------------------------------------------------
PER SHARE DATA
In 1998 the Company generated basic and diluted net income from operations of
$0.36 and $0.35 per common share as compared to reported 1997 basic and diluted
net income of $0.44 and $0.43 per common share. Currency exchange rates did not
have a material impact on 1998 earnings per share.
Net income per share amounts in 1998 and 1997 include tax benefits resulting
from reductions in the United Kingdom's corporate tax rate. In 1998 the benefit
resulting 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.
In 1998 the Company repurchased approximately 15.5 million shares of common
stock for an aggregate cost of $455 million under its share repurchase program,
and issued 27 million treasury shares in connection with its acquisitions. The
Company issued an additional 21 million treasury shares of common stock in
connection with its January 1999 acquisitions.
On April 17, 1998, the Company's Board of Directors approved an increase of the
regular quarterly dividend to $0.04 per common share from $0.025 per common
share. This quarterly dividend increase was effective and payable beginning July
1, 1998.
SELLING, DELIVERY, AND ADMINISTRATIVE EXPENSES
In 1998 consolidated selling, delivery, and administrative expenses as a percent
of net operating revenues increased to 31.0% from 1997 results of 30.7%. The
slight increase resulted primarily from the net effect of increases in
depreciation expense and infrastructure spending, which more than offset the
increase in infrastructure funding from The Coca-Cola Company and the decrease
in expenses associated with executive stock compensation plans.
INTEREST EXPENSE
In 1998 interest expense increased over reported 1997 interest expense,
reflecting a higher 1998 debt balance primarily as a result of 1998 and 1997
acquisitions. The weighted average cost of debt was 6.9% for 1998 and 1997. At
the end of 1998, the Company's debt portfolio was comprised of 30% floating-rate
debt with the remainder at fixed rates.
21
<PAGE> 6
COCA-COLA ENTERPRISES INC.
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
INCOME TAX EXPENSE
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, and was recognized as a credit to income tax
expense in 1998. Excluding this 1998 tax benefit, the Company's effective tax
rate for 1998 was 33%, below the 1997 effective tax rate of 37%. The Company's
effective tax rate reflects a combination of actual 1998 pretax earnings and
the beneficial tax impact of international operations including the
favorable tax treatment granted to certain foreign operations under a tax
holiday expiring by the year 2000.
- --------------------------------------------------------------------------------
CASH FLOW AND LIQUIDITY REVIEW 1998
- --------------------------------------------------------------------------------
CAPITAL RESOURCES
Our sources of capital include, but are not limited to, cash flows from
operations, 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 share
repurchases.
For long-term financing needs, we had available at December 31, 1998,
approximately $3 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 our Euro Medium Term Note
Program.
We satisfy seasonal working capital needs and other financing requirements with
bank borrowings and short-term borrowings under our commercial paper programs
and other credit facilities. At December 31, 1998, we had approximately $687
million outstanding under these credit facilities, with an additional $3.8
billion available for future borrowings. We intend to continue refinancing
borrowings under our commercial paper programs and our short-term credit
facilities with longer-term fixed and floating rate financings.
Our sources of capital allow us the financial flexibility to execute our Capital
Spending Plan, complete our disciplined acquisition strategy of acquiring
businesses that offer us opportunities to implement our operating strategies,
improve our rates of return, and increase share-owner value over the long term.
SUMMARY OF CASH ACTIVITIES
The Company's principal sources of cash consisted of those derived from
operations of $946 million and proceeds from the issuance of debt aggregating
$5 billion. The Company's primary uses of cash were capital expenditures
totaling $1.6 billion, long-term debt repayments totaling $3.6 billion, and
share repurchases for treasury of $455 million.
OPERATING ACTIVITIES: Cash flows from operating activities in 1998 resulted from
the favorable operating performance discussed earlier and from acquisitions. The
increase in depreciation and amortization expenses for 1998 is caused by
increased capital spending and the acquisitions of bottling operations.
INVESTING ACTIVITIES: The Company's continued capital investments in its
infrastructure and the acquisitions of bottling operations resulted in net cash
used in investing activities.
The Company decided to accelerate capital spending in 1998 to take advantage of
the many opportunities in our existing and newly acquired territories. The low
interest and inflation rate environments coupled with the strength of our
business make it an appropriate time to undertake this capital spending program.
Based on our current capital spending program, we expect 1999 capital
expenditures to approximate 1998 expenditures, without giving any effect to
acquisitions.
In 1998 the Company acquired the following bottlers in the United States and
Europe for a total purchase price plus assumed debt of approximately $1.5
billion:
UNITED STATES
- Coke Southwest,
- The Coca-Cola Bottling Company of Bellingham,
- Great Plains Bottlers and Canners, Inc.,
- Soo Coca-Cola Bottling, Inc., and
- The Wolslager Group.
EUROPE
- The Coca-Cola bottling operations in Luxembourg.
These transactions were funded through combinations of cash, promissory notes,
common stock, and convertible preferred stock. Since the Company's inception, we
have acquired numerous bottling companies for a total cost of approximately $13
billion.
FINANCING ACTIVITIES: In 1998 the Company issued $5 billion of notes and
debentures under its shelf registration statement with the Securities and
Exchange Commission, its Euro Medium Term Note Program, and its commercial paper
programs. We used $455 million to repurchase approximately 15.5 million shares
of the Company's common stock in 1998.
22
<PAGE> 7
COCA-COLA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
---------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 142 $ 171 $ 114
Adjustments to reconcile net income
to net cash derived from operating
activities:
Depreciation 725 566 392
Amortization 395 380 235
Deferred income tax benefit (33) (80) (2)
Changes in assets and liabilities,
net of effects from acquisitions
of bottling operations:
Trade accounts and other
receivables (259) (55) 66
Inventories (50) (17) 24
Prepaid expenses and other assets (58) (20) 10
Accounts payable and accrued
expenses 133 (46) 118
Other (49) 43 49
- --------------------------------------------------------------------------------
Net cash derived from operating
activities 946 942 1,006
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in capital assets (1,551) (967) (622)
Fixed asset disposals 17 20 12
Investments in bottling operations,
net of cash acquired ($1,580 and
$533 were paid to The Coca-Cola
Company for bottling operations
in 1997 and 1996, respectively.) (221) (1,987) (676)
Other investing activities (86) -- --
- --------------------------------------------------------------------------------
Net cash used in investing
activities (1,841) (2,934) (1,286)
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of long-term debt 5,008 4,630 875
Payments on long-term debt (3,600) (2,613) (359)
Stock purchases for treasury (455) -- (183)
Dividend payments on common
and preferred stock (58) (33) (19)
Exercise of employee stock options 23 13 10
Additional financing activities -- (7) (5)
- --------------------------------------------------------------------------------
Net cash derived from financing
activities 918 1,990 319
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH INVESTMENTS 23 (2) 39
Cash and cash investments at
beginning of year 45 47 8
- --------------------------------------------------------------------------------
CASH AND CASH INVESTMENTS AT END OF
YEAR $ 68 $ 45 $ 47
- -----------------------------------------=======================================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Investments in bottling
operations:
Fair values of assets acquired $ 2,697 $ 6,146 $ 2,244
Debt issued and assumed (516) (1,621) (42)
Other liabilities assumed (1,019) (2,538) (1,370)
Equity issued (941) -- (156)
- --------------------------------------------------------------------------------
Cash paid, net of cash acquired $ 221 $ 1,987 $ 676
- -----------------------------------------=======================================
Cash paid during the year for:
Interest (net of capitalized
amount) $ 658 $ 482 $ 318
- -----------------------------------------=======================================
Income taxes $ 59 $ 125 $ 39
- -----------------------------------------=======================================
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
23
<PAGE> 8
COCA-COLA ENTERPRISES INC.
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
CASH TAX OBLIGATIONS: During 1987 the Company filed elections under Section
338 of the Internal Revenue Code relating to various bottling companies
acquired in 1986. This election resulted in tax deductibility for the
majority of our franchise assets resulting from these acquisitions.
For tax purposes, the franchise assets from these acquisitions were fully
amortized in 1996. The cash income tax obligation for 1998 decreased over 1997
but is expected to increase in the future once tax operating loss carryforwards
resulting from these accelerated deductions are fully utilized.
- --------------------------------------------------------------------------------
FINANCIAL POSITION 1998
- --------------------------------------------------------------------------------
ASSETS Overall, the increase in total assets from December 31, 1997, to
December 31, 1998, was primarily attributable to the 1998 acquisitions. The
increase in franchises and other noncurrent assets was also a direct
result of the franchise assets acquired in these acquisitions. The
increase in property, plant, and equipment resulted from acquisitions
combined with 1998 capital expenditures of approximately $1.6 billion.
LIABILITIES AND EQUITY
The increase in long-term debt, deferred income taxes, and additional
paid-in capital also resulted primarily from acquisitions. Increased capital
spending and share repurchases also contributed to the increase in long-term
debt. In 1998 we repurchased shares of the Company's common stock which were
added to the Company's treasury stock at cost and issued approximately 27
million treasury shares for the purchase of certain bottling operations
resulting in an increase to additional paid-in capital of $757 million.
In 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") and 450,000 shares of $1 par value voting
convertible preferred stock with a stated value of $100 per share ("Great Plains
series"). In connection with the June 1998 acquisition of The Coca-Cola Bottling
Company of Bellingham, the Company issued 96,900 Bellingham series shares of
preferred stock. The Bellingham series pays quarterly dividends equaling 4%
annually. The Company issued 392,464 Great Plains series shares of preferred
stock on August 6, 1998, in connection with the acquisition of Great
Plains Bottlers and Canners, Inc. The Great Plains series pays quarterly
dividends equaling 8% annually.
In 1998 activities in currency markets resulted in a $21 million adjustment to
the Company's accumulated other comprehensive income (loss). 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.
CONTINGENCIES
At December 31, 1998, there were six federal and one state Superfund sites for
which the Company's involvement or liability as a potentially responsible party
("PRP") was unresolved. We believe any ultimate liability under these PRP
designations will not have a materially adverse effect on our financial
position, cash flows, or results of operations. In addition, there were 18
federal and seven state sites for which it had been concluded the Company either
had no responsibility, the ultimate liability amounts would be less than
$100,000, or payments made to date by the Company would be sufficient to satisfy
the Company's liability.
The Company is a defendant in various matters of litigation generally arising
out of the normal course of business. Although it is difficult to predict the
ultimate outcome of these cases, management believes any ultimate liability
would not materially affect the Company's financial position, results of
operations, or liquidity.
INTEREST RATE AND CURRENCY RISK MANAGEMENT
INTEREST RATES: The Company is exposed to changes in interest rates due to the
Company's intention to finance the purchase and cash flow requirements of
international subsidiaries with local currency borrowings or borrowings that are
effectively exchanged into local borrowings through currency swap agreements.
Interest rate risk is present with both fixed and floating rate debt. We use
interest rate swap agreements and other risk management instruments to manage
our fixed/floating debt profile.
Interest rate swap agreements generally involve exchanges of interest payments
based upon fixed and floating interest rates without exchanges of underlying
face (notional) amounts of the designated hedges. We continually evaluate the
credit quality of counterparties to interest rate swap agreements and other risk
management instruments and do not believe there is a significant risk of
nonperformance by any of the counterparties.
Based on the Company's fixed/floating debt profile at December 31, 1998 and
1997, a 1% increase in market interest rates would increase interest expense and
decrease income before income taxes by $32 million and $31 million,
respectively. These amounts were determined by calculating the effect of the
hypothetical interest rate on our floating rate debt, after giving consideration
to our interest rate swap agreements and other risk management instruments.
These amounts do not include the effects of certain potential results of
increased interest rates, such as a reduced level of overall economic activity
or other actions management may take to mitigate this risk. Furthermore, this
sensitivity analysis does not assume changes in our financial structure that
could occur if interest rates were higher.
24
<PAGE> 9
COCA-COLA ENTERPRISES INC.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
-------------------------
DECEMBER 31,
-------------------------
(In millions except share data) 1998 1997
- --------------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash investments, at cost approximating
market $ 68 $ 45
Trade accounts receivable, less reserves of $57 and
$58, respectively 1,337 1,007
Inventories:
Finished goods 373 330
Raw materials and supplies 170 132
- --------------------------------------------------------------------------------
543 462
Current deferred income tax assets 74 70
Prepaid expenses and other current assets 263 229
- --------------------------------------------------------------------------------
Total Current Assets 2,285 1,813
PROPERTY, PLANT, AND EQUIPMENT
Land 349 297
Buildings and improvements 1,237 1,065
Machinery and equipment 6,068 4,653
- --------------------------------------------------------------------------------
7,654 6,015
Less allowances for depreciation 2,956 2,295
- --------------------------------------------------------------------------------
4,698 3,720
Construction in progress 193 142
- --------------------------------------------------------------------------------
Net Property, Plant, and Equipment 4,891 3,862
FRANCHISES AND OTHER NONCURRENT ASSETS, NET 13,956 11,812
- --------------------------------------------------------------------------------
$ 21,132 $ 17,487
- -------------------------------------------------------=========================
LIABILITIES AND SHARE-OWNERS' EQUITY
CURRENT
Accounts payable and accrued expenses $ 2,254 $ 1,994
Amounts payable to The Coca-Cola Company, net 3 6
Current portion of long-term debt 1,140 1,032
- --------------------------------------------------------------------------------
Total Current Liabilities 3,397 3,032
LONG-TERM DEBT, LESS CURRENT MATURITIES 9,605 7,760
RETIREMENT AND INSURANCE PROGRAMS AND OTHER
LONG-TERM OBLIGATIONS 977 917
LONG-TERM DEFERRED INCOME TAX LIABILITIES 4,715 3,996
SHARE-OWNERS' EQUITY
Preferred stock 49 --
Common stock, $1 par value - Authorized
1,000,000,000 shares; issued 446,319,946 and
442,971,597 shares, respectively 446 443
Additional paid-in capital 2,190 1,364
Reinvested earnings 458 374
Accumulated other comprehensive income (loss) (2) (16)
Common stock in treasury, at cost (44,865,214 and
56,418,084 shares, respectively) (703) (383)
- --------------------------------------------------------------------------------
Total Share-Owners' Equity 2,438 1,782
- --------------------------------------------------------------------------------
$ 21,132 $ 17,487
- -------------------------------------------------------=========================
The accompanying Notes to Consolidated Financial Statements are an integral of
these balance sheets.
25
<PAGE> 10
COCA-COLA ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF SHARE-OWNERS' EQUITY
- --------------------------------------------------------------------------------
---------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------
(In millions except per share data) 1998 1997 1996
- --------------------------------------------------------------------------------
PREFERRED STOCK
Balance at beginning of year $ -- $ 134 $ 30
Issuance of shares to effect
acquisitions 49 -- 155
Conversion of preferred stock
to common stock -- (134) (53)
Preferred stock accretion -- -- 2
- --------------------------------------------------------------------------------
Balance at end of year 49 -- 134
- --------------------------------------------------------------------------------
COMMON STOCK
Balance at beginning of year 443 147 145
Issuance of management stock
performance awards -- -- 1
Exercise of employee stock
options, including tax effect 3 1 1
3-for-1 common stock split -- 295 --
- --------------------------------------------------------------------------------
Balance at end of year 446 443 147
- --------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 1,364 1,434 1,346
Issuance of management stock
performance awards -- 57 89
Unamortized cost of management
stock performance awards -- (57) (90)
Expense amortization of management
stock performance awards 13 89 40
Exercise of employee stock options,
including tax effect 20 12 15
Tax effect of management stock
performance awards 31 12 9
Conversion of preferred stock
to common stock -- 94 25
Conversion of executive deferred
compensation to equity 5 18 --
3-for-1 common stock split -- (295) --
Issuance of shares to effect
acquisitions 757 -- --
- --------------------------------------------------------------------------------
Balance at end of year 2,190 1,364 1,434
- --------------------------------------------------------------------------------
REINVESTED EARNINGS
Balance at beginning of year 374 237 144
Dividends on common stock (per
share - $0.13 in 1998 and
$0.10 in 1997 and 1996) (57) (32) (13)
Dividends on preferred stock (1) (2) (8)
Net income 142 171 114
- --------------------------------------------------------------------------------
Balance at end of year 458 374 237
- --------------------------------------------------------------------------------
TREASURY STOCK
Balance at beginning of year (383) (423) (268)
Forfeiture of management stock
performance awards -- -- (1)
Purchase of common stock for treasury (455) -- (183)
Issuance of shares to effect
acquisitions 135 -- 1
Conversion of preferred stock
to common stock -- 40 28
- --------------------------------------------------------------------------------
Balance at end of year (703) (383) (423)
- --------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
Currency translations, net of tax 21 (37) (17)
Minimum pension liability
adjustment, net of tax (7) -- --
- --------------------------------------------------------------------------------
Net other comprehensive
income adjustments 14 (37) (17)
Balance at beginning of year (16) 21 38
- --------------------------------------------------------------------------------
Balance at end of year (2) (16) 21
TOTAL SHARE-OWNERS' EQUITY $ 2,438 $ 1,782 $ 1,550
- -----------------------------------------=======================================
COMPREHENSIVE INCOME
Net income $ 142 $ 171 $ 114
Net other comprehensive income
adjustments 14 (37) (17)
- --------------------------------------------------------------------------------
Total Comprehensive Income $ 156 $ 134 $ 97
- -----------------------------------------=======================================
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
26
<PAGE> 11
COCA-COLA ENTERPRISES INC.
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
CURRENCY: Our European operations represented approximately 25% of consolidated
long-lived assets and consolidated net operating revenues for 1998. Because of
our international operations, we are exposed to translation risk when the local
currency statements of income are translated into U.S. dollars. As currency
exchange rates fluctuate, translation of the statements of income of
international businesses into U.S. dollars will affect comparability of revenues
and expenses between years. None of the components of our consolidated
statements of income was materially affected by exchange rate fluctuations in
1998, 1997, or 1996. We hedge a significant portion of our net investments in
international subsidiaries by financing the purchase and cash flow requirements
of international subsidiaries through either local currency borrowings or
borrowings that are effectively exchanged into local borrowings through currency
swap agreements.
The Company's revenues are denominated in each international subsidiary's local
currency; thus, the Company is not exposed to currency transaction risk on its
revenues. The Company is exposed to currency transaction risk on certain
purchases of raw materials and equipment by its international subsidiaries. We
use currency forward agreements and purchased currency options to hedge a
significant portion of the aforementioned raw material purchases. The Company
did not have any options outstanding at December 31, 1998. The notional amount
outstanding at December 31, 1998, for currency forward exchange agreements
was $238 million. These forward contracts are scheduled to expire in 1999 and
2000. At December 31, 1998, a hypothetical 10% adverse movement in foreign
exchange rates applied to the hedging agreements and underlying exposures
described above would not have a material effect on our earnings.
- --------------------------------------------------------------------------------
CURRENT TRENDS AND UNCERTAINTIES
- --------------------------------------------------------------------------------
YEAR 2000 COMPLIANCE
Our Year 2000 strategic plan identifies initiatives necessary to minimize
failures of electronic systems to process date sensitive information in the Year
2000 and beyond. Our plan is subdivided into six functional areas of the
Company: Sales/Marketing, Human Resources, Cold Drink, Finance, Operations, and
Corporate. 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, replace, and to test
modifications. Projects are in various stages of completion. We estimate that
approximately 75% of the identified issues have been corrected at December 31,
1998.
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 result of our development
and standardization plans. 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.
The remediation process is targeted to be 90% completed by the end of 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
-------------------------
1999
- --------------------------------------------------------------------------------
Revenue, billing, and accounts receivable 1st Qtr. 2nd Qtr.
Order entry and fulfillment 3rd Qtr. 2nd Qtr.
Inventory and cost accounting 3rd Qtr. 2nd Qtr.
Accounts payable and purchasing 3rd Qtr. 2nd Qtr.
Payroll 1st Qtr. 2nd Qtr.
General ledger 1st Qtr. 2nd Qtr.
Production processing 1st Qtr. 2nd Qtr.
Electronic commerce (EDI) 3rd Qtr. 3rd Qtr.
Other non-IT systems 2nd Qtr. 2nd Qtr.
- --------------------------------------------------------------------------------
We have incurred approximately $21 million to date in the implementation of our
Year 2000 strategic plan for both IT and non-IT systems of which $5 million has
been capitalized. The total cost through completion of our Year 2000 plan is
estimated to be in the range of $32 to $40 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.
27
<PAGE> 12
COCA-COLA ENTERPRISES INC.
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
An important 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 its
interface systems are vulnerable if a customer, supplier, or a third party fails
to resolve its Year 2000 issues. In the third quarter of 1998, we identified two
raw materials/packaging suppliers that appeared to be having difficulty
achieving Year 2000 readiness. As a result of follow-up efforts during the
fourth quarter of 1998, we believe significant progress has been made by both
suppliers to inventory, assess, and remediate Year 2000 problems. We will
continue to work with these and all other critical trading partners to
understand the associated risks and, if necessary, develop contingency plans.
We continue to plan for business continuity through strategies calling for
increasing our inventories at the end of 1999, as well as developing plans to
operate manually, if necessary. These plans serve to ensure we can continue to
meet our customers' needs for products in the most efficient manner as well as
to ensure critical operations can continue to operate effectively.
We believe necessary modifications and replacements of our critical IT and
non-IT systems will be completed in a timely manner. If for any reason our
critical service providers, suppliers, or customers are unable to resolve their
Year 2000 issues, such matters could have a material impact on the Company's
results of operations. Specifically, the absence of Year 2000 readiness by raw
material/packaging suppliers could impact the availability and expected costs of
raw materials and could therefore result in higher costs if we turned to
alternate sources of supply.
EURO CURRENCY CONVERSIONS
On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between existing currencies and the European Union's
common currency ("euro"). The Company conducts business in several of the member
countries. The transition period for the introduction of the euro will be
between January 1, 1999, and June 30, 2002. The euro conversion may have
long-term competitive pricing implications by creating cross-border product
price transparency. We continue to assess and implement our pricing and
marketing strategies to ensure we remain competitive in the broader European
market.
We have also established a multifunctional task force engaged to address the
issues involved with the introduction of the euro. The issues facing the company
include converting information technology systems, adapting business processes
and equipment such as vending machines, reassessing currency risk, and
processing tax and accounting records. Additionally, the Company is at risk to
the extent its principal European suppliers and customers are unable to deal
effectively with the impact of the euro conversion.
Based upon progress to date, the Company believes use of the euro will not have
a significant impact on the manner in which it conducts its business or
processes its business and accounting records. However, due to the numerous
uncertainties, we cannot reasonably estimate the long-term effects one common
currency may have on pricing and costs, or the resulting impact, if any, on
financial condition or results of operations.
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 fair market 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 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.
- --------------------------------------------------------------------------------
OPERATIONS REVIEW 1997-1996
- --------------------------------------------------------------------------------
OVERVIEW
In 1997 the Company's cash operating profit results reflected volume growth
above industry rates and decreases in cost of sales per case that more than
offset lower net revenues per case. Strong volume growth, reduced interest
expense as a percent of revenues, and a lower effective tax rate resulted in
1997 cash operating profit and net income margins in excess of comparable 1996
margins. The gross profit and operating income margins for 1997 declined
slightly from 1996 primarily because of higher depreciation and noncash stock
compensation amortization expenses.
For the 1997-1996 discussion, "comparable" results are adjusted for the
impact of acquisitions and one-time items and are determined by adjusting 1996
results:
- to include the results of significant acquisitions for the same periods
included in 1997 reported results and
- to exclude the first-quarter 1996 favorable supplier settlement of $10
million.
28
<PAGE> 13
COCA-COLA ENTERPRISES INC.
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
Cash Operating Profit is a key standard by which management measures operating
performance. In 1997 cash operating profit exceeded $1.6 billion, reflecting 42%
growth over 1996 reported results. Comparable 1997 cash operating profit
reflected a 10% growth rate.
Volume growth in 1997 was impacted by strong performance of Coca-Cola classic,
Sprite, SURGE, Barq's, and Cool from Nestea. This growth was an indicator of our
continued increase in market share in our territories.
Comparable bottle and can physical case volume for 1997 increased over 1996
levels by 7%, following a 5.5% growth rate in 1996. The 1997 comparable growth
resulted from a 6% increase in domestic volume that was higher than industry
growth rates, combined with an 8% growth in international volume. On a unit case
basis, 76% of the Company's 1997 volume was from North American operations and
24% was from our European operations.
Net Operating Revenues in 1997 were comprised principally of wholesale sales to
retailers, accounting for approximately 96% of our net revenues. Reported net
operating revenues for 1997 reached $11.3 billion, representing a 4% increase
over comparable 1996 results. Net revenues per case and cost of sales per case
decreased 2.5% and 2%, respectively, from comparable 1996 per case data.
Selling, Delivery, and Administrative Expenses increased 4% in 1997 over
comparable 1996 expenses. The 1997 acquisitions, combined with incremental
amortization expenses for executive stock compensation plans, resulted in a
reported increase in selling, delivery, and administrative expenses of 40%.
However, selling, delivery, and administrative expenses as a percent of net
operating revenues remained relatively constant in 1997 when compared to 1996.
Noncash stock compensation costs are included in selling, delivery, and
administrative expenses. In 1997 the significant increase in the Company's stock
price and accelerated recognition of costs associated with these plans resulted
in a 67% increase in total stock compensation expenses over 1996 costs.
Interest Expense increased in 1997 over reported 1996 interest expense,
reflecting a higher 1997 debt balance primarily a result of the 1997 and 1996
acquisitions. For 1997 the weighted average cost of debt was 6.9% as compared to
the 1996 weighted average cost of debt of 7.2%.
Income Tax Expense and the Company's deferred tax liabilities were reduced by
$58 million in 1997 because of the reduction in the United Kingdom's income tax
rate from 33% to 31% effective April 1, 1997. Excluding this one-time tax
benefit ($0.15 per common share), the Company's effective tax rate for 1997 was
37%, below the 1996 effective tax rate of 41%.
Basic Earnings Per Share in 1997 was $0.44 compared to reported year-to-date
1996 results of $0.28 per share. Basic net income per share for 1997 includes a
$58 million ($0.15 per share) one-time tax benefit resulting from the reduction
in the United Kingdom's corporate tax rate and a $6 million one-time charge for
the redemption of $142 million in 8.75% debentures due 2017 ($0.01 per share
after tax). When we exclude these one-time items, 1997 basic net income per
share was $0.30.
- --------------------------------------------------------------------------------
CASH FLOW REVIEW 1997-1996
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
The cash flows from operating activities for 1997 resulted from the favorable
operating performance discussed earlier and from our acquisitions. The increase
in depreciation expense for 1997 is caused by increased capital spending and
acquisitions. The increase in amortization expense for 1997 reflects additional
franchise amortization from acquisitions and amortization from stock-based
compensation plans.
INVESTING ACTIVITIES
The significant increase in net cash used in investing activities in 1997
compared to 1996 is primarily a result of the 1997 European and North American
acquisitions at a total cost of approximately $2 billion in cash, net of cash
acquired. The 1997 acquisitions were initially financed through combinations of
cash, sellers' notes, public debt securities, and bank borrowings. Capital
expenditures in 1997 increased 55% over 1996 primarily because of our
significant growth and the capital investments made by our international
operations.
FINANCING ACTIVITIES
In 1997 the Company issued $1,150 million in notes and debentures due 2001 -
2037 with a weighted average interest rate of 6.7% under its shelf registration
statement with the Securities and Exchange Commission. On September 30, 1997,
the Company issued $500 million in notes due 2002 under its Euro Medium Term
Note Program with the Luxembourg Stock Exchange.
On April 1, 1997, the Company redeemed 8.75% debentures due 2017, aggregating
$142 million. Costs of $6 million associated with this redemption were included
in results of operations as a nonoperating expense.
29
<PAGE> 14
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
THE COMPANY'S BUSINESS: Coca-Cola Enterprises Inc. ("the Company") is the
world's largest marketer, distributor, and producer of bottle and can liquid
nonalcoholic refreshment. The Company distributes its bottle and can products to
customers and consumers in the United States and Canada through franchise
territories in 46 states in the United States, the District of Columbia, and the
10 provinces of Canada. The Company is also the sole licensed bottler for
products of The Coca-Cola Company in Belgium, Great Britain, Luxembourg, the
Netherlands, and most of France.
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 December 31. For quarterly reporting convenience, the
Company reports on the Friday closest to the end of the quarterly calendar
period. The financial statements and accompanying notes prepared in accordance
with generally accepted accounting principles ("GAAP") include estimates and
assumptions made by management which affect reported amounts. Actual results
could differ from those estimates.
CASH INVESTMENTS: Cash investments include all highly liquid cash investments
purchased with original maturity dates less than three months. The fair value of
cash and cash investments approximates the amounts shown in the financial
statements.
CREDIT RISK AND SALE OF ACCOUNTS RECEIVABLE: The Company sells its products to
chain stores and other customers and extends credit, generally without requiring
collateral, based on an evaluation of the customer's financial condition.
Potential losses on receivables are dependent on each individual customer's
financial condition. The Company monitors its exposure to losses on receivables
and maintains allowances for potential losses or adjustments. The Company's
accounts receivable are typically collected within approximately 30 days.
The Company has an agreement with a Canadian financial institution whereby the
Company can sell up to approximately $49 million of designated pools of accounts
receivable. At December 31, 1998, the Company had sold approximately $49 million
of receivables, which are excluded from the accompanying balance sheet. The
Company retains collection and administrative responsibilities for the accounts
receivable sold.
INVENTORIES: The Company values its inventories at the lower of cost or market.
Cost is determined using the first-in, first-out ("FIFO") method.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment are stated at
cost. Depreciation expense is computed using the straight-line method over the
estimated useful lives of 20 to 40 years for buildings and improvements and
three to 14 years for machinery and equipment. Leasehold improvements are
amortized over the shorter of the asset's life or the remaining contractual
lease term.
FRANCHISES AND OTHER NONCURRENT ASSETS, NET: Franchise agreements contain
performance requirements and convey to the franchisee the rights to distribute
and sell products of the franchiser within specified territories. The majority
of the Company's franchise agreements are perpetual, reflecting a long and
ongoing relationship with The Coca-Cola Company and other franchisers. The
Company's agreements covering its European and Canadian operations are not
perpetual because The Coca-Cola Company does not grant perpetual franchise
rights outside the United States. The Company believes these agreements will
continue to be renewed at each expiration date, and therefore, are essentially
perpetual.
Franchise costs are amortized on a straight-line basis over 40 years, the
maximum period allowed under GAAP. Accumulated franchise amortization amounted
to $1,898 million and $1,537 million at December 31, 1998 and 1997,
respectively.
In the event facts and circumstances indicate the cost of franchises or other
assets may be impaired, an evaluation of recoverability would then 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. In 1998, 1997, and 1996 the Company had no significant impairment
losses.
INSURANCE PROGRAMS: In general, the Company is self-insured for costs of
workers' compensation, casualty, and health and welfare claims. The Company uses
commercial insurance for casualty and workers' compensation claims as a risk
reduction strategy to minimize catastrophic losses. Workers' compensation and
casualty losses are provided for using actuarial assumptions and procedures
followed in the insurance industry, adjusted for company-specific history and
expectations.
30
<PAGE> 15
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MANAGEMENT STOCK-BASED COMPENSATION PLANS: The Company accounts for stock-based
compensation plans under Accounting Principles Board ("APB") Opinion No. 25 and
related Interpretations, as permitted by Financial Accounting Standards Board
("FASB") Statement No. 123 "Accounting for Stock-Based Compensation" ("SFAS
123"). As part of the Company's overall management compensation program, the
Company issues stock compensation awards to key executives that have value only
if aggressive stock performance goals are met. The Company believes these awards
enhance the focus of key executives on share-owner value, resulting in higher
stock values for the Company's share owners. The costs associated with these
plans, if any, are charged to additional paid-in capital upon award as an
unearned compensation intangible asset and amortized over the estimated vesting
period as compensation amortization expense. Changes to the total estimated
vesting period are based on management's judgment and the impact of these
changes is reflected in the financial statements in the period of change and
subsequent periods.
FOREIGN CURRENCY TRANSLATIONS: Assets and liabilities of international
operations are translated from the local currency into U.S. dollars at the
approximate rate of currency exchange at the end of the fiscal period.
Translation gains and losses of foreign operations that use local currencies as
the functional currency are included in accumulated other comprehensive income
(loss) as a component of share-owners' equity. Revenues and expenses are
translated at average monthly exchange rates for the preceding month.
Transaction gains and losses arising from exchange rate fluctuations on
transactions denominated in a currency other than the local functional currency
are included in results of operations.
DERIVATIVE FINANCIAL INSTRUMENTS: The Company uses swap agreements and other
risk management instruments to manage its interest rate exposures. The Company
specifically designates these agreements as hedges of debt instruments and
recognizes interest differentials as adjustments to interest expense in the
period the differentials occur.
The Company is exposed to financial risks from movements in currency exchange
rates from its international operations. To manage these risks, the Company
selectively uses currency swap agreements, forwards, and options and
specifically designates these instruments as hedges of (i) net investments in
international subsidiaries, (ii) foreign currency-denominated debt, (iii)
anticipated foreign currency transactions, or (iv) firmly committed foreign
currency transactions. Realized and unrealized gains and losses from hedges of
net investments are included in accumulated other comprehensive income (loss) as
a component of share-owners' equity. Gains and losses on hedges of foreign
currency-denominated debt offset gains and losses on foreign currency-
denominated debt and are recognized in other nonoperating income (deductions).
Realized and unrealized gains and losses from hedges of anticipated and firmly
committed foreign currency transactions are recognized as adjustments to gains
and losses resulting from the underlying hedged transactions. The Company does
not hold or issue financial instruments for trading purposes.
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," in June 1998. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999; early adoption is
allowed. The Company has not yet determined the effect SFAS No. 133 will have on
the operating results or the financial position of the Company.
MARKETING AND OTHER SUPPORT ARRANGEMENTS: The Company participates in various
programs supported by The Coca-Cola Company or other franchisers. Under these
programs, certain costs incurred by the Company are reimbursed by the applicable
franchiser. Depending on the objective of each specific program, support
payments are recognized as either a reduction of sales discounts and allowances
in net revenues or a reduction of operating expenses. Franchiser funding is
recognized when performance measures are met or as funded costs are incurred.
2 ACQUISITIONS AND DIVESTITURES
- --------------------------------------------------------------------------------
When acquiring bottling operations having Coca-Cola franchises, the Company
purchases the right to market, distribute, and produce beverage products of The
Coca-Cola Company in specified territories. When acquisitions of other
franchiser product rights occur, similar rights are also obtained. The purchase
method of accounting has been used for all acquisitions, and accordingly, the
results of operations of acquired companies are included in the Company's
consolidated statements of income beginning with the date of acquisition. In
addition, the assets and liabilities of companies acquired in 1998 are included
in the Company's consolidated balance sheet at the preliminary estimates of
their fair values on the date of acquisition.
The following outlines the Company's acquisition activity for 1998, 1997, and
1996 and also includes information regarding the Company's acquisition activity
in January 1999.
1998
On June 5, 1998, the Company acquired CCBG Corporation and Texas Bottling Group,
Inc. ("Coke Southwest") operating in parts of Colorado, Kansas, New Mexico,
Oklahoma, and Texas. The acquisition was completed for a transaction value of
approximately $1.1 billion, with 55% of the transaction funded through the
issuance of 17.8 million shares of the Company's common stock and the remaining
45% funded through debt issued and assumed.
31
<PAGE> 16
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Also in 1998, the Company acquired the following bottlers in the United States
and Europe for a total transaction value of approximately $355 million:
UNITED STATES
- The Coca-Cola Bottling Company of Bellingham, located in the
northwest corner of Washington State,
- Great Plains Bottlers and Canners, Inc., operating in parts of
Kansas, Nebraska, and South Dakota,
- Soo Coca-Cola Bottling, Inc., located in the upper peninsula of Michigan,
- Wolslager Group, operating in parts of Texas, New Mexico, and Arizona, and
EUROPE
- The Coca-Cola bottling operations in Luxembourg ("Luxembourg bottler"),
formerly owned by Soutirages Luxembourgeois S.A.
These transactions were funded through combinations of cash, promissory notes,
common stock, and convertible preferred stock.
1997
On August 7, 1997, the Company acquired The Coca-Cola Company's 48% interest in
Coca-Cola Beverages Ltd. ("Coke Canada") and increased its ownership interest in
The Coca-Cola Bottling Company of New York, Inc. ("Coke New York") to 53% by
acquiring The Coca-Cola Company's 49% interest in Coke New York. In September
1997 the Company acquired the remaining shares of Coke Canada held by the
public. In January 1998 the Company acquired the remaining shares of Coke New
York held by minority share owners. The total transaction value (purchase price,
acquired debt, and preferred stock) for all ownership interests in Coke New York
and Coke Canada was approximately $1.7 billion. Coke Canada operates in all 10
Canadian provinces. Coke New York operates in the New York metropolitan area,
certain other areas in the state of New York, and in parts of Connecticut,
Massachusetts, New Hampshire, New Jersey, and Vermont.
On February 10, 1997, the Company purchased Amalgamated Beverages Great Britain
Limited ("ABGB") from The Coca-Cola Company and Cadbury Schweppes plc for an
aggregate transaction value (purchase price, assumed debt, and other long-term
obligations) of approximately $2 billion. Coca-Cola & Schweppes Beverages
Limited ("CCSB"), a wholly-owned subsidiary of ABGB, produces and distributes
beverage products of The Coca-Cola Company and Cadbury Schweppes plc in Great
Britain. CCSB has entered into long-term contracts to continue to produce and
distribute products of both The Coca-Cola Company and Cadbury Schweppes plc in
Great Britain.
1996
On August 12, 1996, the Company acquired Coca-Cola Bottling Company West, Inc.,
and a related company, Grand Forks Coca-Cola Bottling Co., (collectively, "Coke
West") for a transaction value (purchase price and assumed debt) of
approximately $158 million. Coke West operates franchise territories in portions
of Minnesota, Montana, North Dakota, South Dakota, and Wyoming.
On July 26, 1996, the Company acquired The Coca-Cola Company's bottling and
canning operations in Belgium and France for a transaction value (purchase price
and assumed debt, net of cash acquired) of approximately $915 million. These
franchise territories encompass most of France and all of Belgium. The entities
acquired were Coca-Cola Enterprise S.A. (formerly known as Coca-Cola Beverages
S.A., "French bottler"), Coca-Cola Production S.A. ("French canner"), and S.A.
Beverage Sales Holding N.V. (owner of the "Belgian bottler").
On February 21, 1996, the Company acquired Ouachita Coca-Cola Bottling Company,
Inc. ("Ouachita") for a transaction value (purchase price and issued and assumed
debt) of approximately $313 million. The purchase price was paid through a
combination of cash, shares of the Company's common stock from treasury, and
convertible preferred stock. Ouachita operates in portions of Arkansas,
Louisiana, and Mississippi.
SUBSEQUENT EVENTS
In January 1999 the Company completed the following acquisitions for an
aggregate purchase price of approximately $620 million:
- Cameron Coca-Cola Bottling Company, operating in Pittsburgh, Pennsylvania,
and portions of Ohio and West Virginia,
- Bryan Coca-Cola Bottling Company, operating in eastern Texas,
- The Coca-Cola, Dr Pepper Bottling Company of Albuquerque, operating in
western New Mexico,
- Nacogdoches Coca-Cola Bottling Company, operating in eastern Texas,
- Sulphur Springs Coca-Cola Bottling Company, operating in eastern Texas,
and
- Montgomery Coca-Cola Bottling Company, operating in Alabama.
32
<PAGE> 17
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PRO FORMA INFORMATION
The following table summarizes unaudited pro forma financial information of the
Company for 1997 and 1996 as if the following 1997 and 1996 acquisitions were
acquired effective January 1, 1996:
1997
- Coke Canada,
- Coke New York,
- ABGB,
1996
- Coke West,
- French bottler,
- French canner,
- Belgian bottler, and
- Ouachita.
-------------------------
1997 1996
- --------------------------------------------------------------------------------
Net Operating Revenues $ 12,377 $ 11,878
- -------------------------------------------------------=========================
Pro Forma Net Income Applicable
to Common Share Owners $ 115 $ --
- -------------------------------------------------------=========================
Pro Forma Basic Net Income Per Share
Applicable to Common Share Owners $ 0.30 $ --
- -------------------------------------------------------=========================
Pro Forma Diluted Net Income Per Share
Applicable to Common Share Owners $ 0.29 $ --
- -------------------------------------------------------=========================
The unaudited pro forma financial information reflects adjustments for: (i) the
repayment of certain assumed debt, (ii) financing of the transactions at an
estimated financing cost for each acquisition, (iii) amortization of the value
of the acquired franchise assets over 40 years, (iv) contractual changes to the
business of certain of the acquired companies, and (v) the income tax effect of
the foregoing (in millions except per share data).
The effect of the following completed 1998 and 1999 acquisitions was not
presented in unaudited pro forma financial information because the acquisitions
are not significant to the Company's consolidated financial statements:
1998
- Luxembourg bottler,
- Coke Southwest,
- The Coca-Cola Bottling Company of Bellingham,
- Great Plains Bottlers and Canners, Inc.,
- Soo Coca-Cola Bottling, Inc.,
- Wolslager Group,
1999
- Cameron Coca-Cola Bottling Company,
- Bryan Coca-Cola Bottling Company,
- The Coca-Cola, Dr Pepper Bottling Company of Albuquerque,
- Nacogdoches Coca-Cola Bottling Company,
- Sulphur Springs Coca-Cola Bottling Company, and
- Montgomery Coca-Cola Bottling Company.
3 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- --------------------------------------------------------------------------------
At December 31, accounts payable and accrued expenses consist of the following
(in millions):
-------------------------
1998 1997
- --------------------------------------------------------------------------------
Trade accounts payable $ 773 $ 581
Accrued advertising costs 360 335
Accrued compensation and benefits 261 253
Accrued interest 194 146
Additional accrued expenses 666 679
- --------------------------------------------------------------------------------
$ 2,254 $ 1,994
- ----------------------------------------------------------======================
33
<PAGE> 18
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 LONG-TERM DEBT
- --------------------------------------------------------------------------------
The table below summarizing the Company's long-term debt (in millions) at
December 31 is adjusted for the effects of interest rate and currency swap
agreements:
-------------------------
1998 1997
- --------------------------------------------------------------------------------
U.S. commercial paper (weighted average
rates of 4.5% and 4.3%)(A) $ 1,572 $ 773
Canadian dollar commercial paper
(weighted average rate of 5.1%) 626 --
Canadian dollar loans payable
(weighted average rates of 5.2% and 4.2%) 309 892
British pound sterling loans payable
(weighted average rates of 6.5% and 6.9%) 249 1,194
Notes due 1999 - 2037 (weighted
average rates of 6.8% and 7.2%)(B) 2,150 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
$1,598 and $1,625, respectively) 334 307
Euro notes due 2002 - 2011 (weighted
average rates of 7.2% and 7.5%)(C) 1,199 531
Various foreign currency debt 311 138
Additional debt(A) 178 504
- --------------------------------------------------------------------------------
Long-term debt including effect of net
asset positions of currency swaps 10,728 8,789
Net asset positions of currency
swap agreements(D) 17 3
- --------------------------------------------------------------------------------
$ 10,745 $ 8,792
- -------------------------------------------------------=========================
Aggregate maturities of long-term debt during the next five years are as follows
(in millions): 1999 - $1,140; 2000 - $371; 2001 - $2,032; 2002 - $1,134; and
2003 - $497.
(A) At December 31, 1998 and 1997, $1,352 million and $957 million of the
Company's U.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 net investments in international subsidiaries.
(B) In 1998 the Company issued $600 million of 5.75% notes due 2008 and $900
million of debentures due 2028 - 2098 with a weighted average interest
rate of 6.8% under its shelf registration statement with the Securities and
Exchange Commission.
(C) In 1998 the Company issued $666 million in notes due 2003 - 2011 with a
weighted average interest rate of 6.9% under its Euro Medium Term Note
Program.
At December 31, 1998 and 1997, $697 million and $531 million, respectively,
of the euro notes are effectively changed to British pound sterling notes
through currency swap agreements entered into simultaneously with the
notes. The remaining euro notes are denominated in British pounds sterling.
(D) The net asset positions of currency swap agreements are included in the
balance sheet as assets.
The Company has domestic and international credit facilities to support its
commercial paper programs and other borrowings as needed. At December 31, 1998
and 1997, the Company had $687 million and $1,639 million, respectively, of
short-term borrowings outstanding under these credit facilities. At December 31,
1998 and 1997, the Company has approximately $3.8 billion and $2.3 billion,
respectively, of amounts available under domestic and international credit
facilities.
At December 31, 1998 and 1997, $2.4 billion of borrowings due in the next 12
months was classified as maturing after one year due to the Company's intent and
ability through its credit facilities to refinance these borrowings on a
long-term basis.
At December 31, 1998 and 1997, the Company had available for issuance
approximately $3 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 a Euro Medium Term Note Program.
The credit facilities 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 to the Company's liquidity or capital
resources.
34
<PAGE> 19
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 DERIVATIVE FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
INTEREST RATE RISK MANAGEMENT: The Company uses interest rate swap agreements
and other risk management instruments to manage its fixed/floating debt profile.
The Company has floating-to-fixed interest rate swaps with total notional
amounts outstanding at December 31, 1998, of $48 million expiring through 2001.
At December 31, 1998, the Company received and paid a weighted average interest
rate of 5.2% under these swaps. At December 31, 1997, the Company received a
weighted average interest rate of 4.3% and paid a weighted average interest rate
of 6.0% on swaps with a notional amount of $146 million.
At December 31, 1998 and 1997, the Company had interest rate caps outstanding of
$516 million and $279 million, respectively. Premiums paid for these caps are
amortized to interest expense over the contract term. Payments received during
1998 or 1997 under these cap agreements were not significant.
CURRENCY RISK MANAGEMENT: The Company uses currency swap agreements, forward
agreements, options, and other risk management instruments to manage its
exposure to currency fluctuations. Details of currency swap agreements related
to debt are presented in the long-term debt footnote.
The Company uses currency options and currency forward agreements to hedge
exchange rate exposure on certain of the Company's international raw materials
purchase commitments. Notional amounts outstanding for option contracts at
December 31, 1997, were $96 million with total premiums paid in 1997 of $3
million. The Company did not have option contracts outstanding at December 31,
1998; no option premiums were paid in 1998. Notional amounts outstanding for
forward contracts at December 31, 1998 and December 31, 1997, are $238 million
and $1.2 billion, respectively. The Company's forward contracts are scheduled to
expire in 1999 and 2000. The Company deferred approximately $1 million of
realized losses relating to such contracts at December 31, 1997; no amounts were
deferred in 1998.
CREDIT RISK: The Company is exposed to credit losses in the event of
nonperformance by counterparties to exchange agreements. Counterparties to the
Company's exchange agreements are major financial institutions and their
creditworthiness is subject to continuing review; however, full performance is
anticipated.
- --------------------------------------------------------------------------------
6 FAIR VALUES OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
The carrying amounts and fair values of the Company's financial instruments at
December 31 are summarized as follows (in millions; (liability)/asset):
-----------------------------------------------------
1998 1997
-----------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUES Amount Values
- --------------------------------------------------------------------------------
Debt Related Financial
Instruments:
Long-term debt $(10,721) $(11,521) $ (8,753) $ (9,228)
Currency swap
agreements in
liability positions (24) (40) (39) (33)
Interest rate swap
agreements -- -- -- (1)
- --------------------------------------------------------------------------------
(10,745) (11,561) (8,792) (9,262)
Currency swap
agreements in asset
positions 17 13 3 3
- --------------------------------------------------------------------------------
Net debt $(10,728) $(11,548) $ (8,789) $ (9,259)
- ---------------------------=====================================================
Currency options $ -- $ -- $ 3 $ 2
- ---------------------------=====================================================
Currency forward
agreements $ -- $ 3 $ -- $ (33)
- ---------------------------=====================================================
The term of commercial paper and the variable interest rate on variable rate
debt result in the recorded liabilities of these instruments approximating their
fair values. The fair values of the Company's long-term debt, representing the
estimated amounts at which the debt could be exchanged on the open market, are
determined using 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. External
valuations performed by investment bankers were used to determine the fair
values of the Company's currency forward agreements, currency options, currency
swap agreements, and interest rate swap agreements.
35
<PAGE> 20
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7 STOCK-BASED COMPENSATION PLANS
- --------------------------------------------------------------------------------
The Company has elected to apply APB Opinion No. 25 and related Interpretations
in accounting for its stock-based compensation plans, instead of applying the
optional cost recognition requirements of SFAS 123. SFAS 123, if fully adopted,
would change the method for cost recognition on the Company's stock-based
compensation plans. Pro forma disclosures as if the Company had adopted the SFAS
123 cost recognition requirements follow.
The Company's stock option plans provide for the granting of nonqualified stock
options to certain key employees. Generally, options outstanding under the
Company's stock option plans expire 10 years subsequent to award and are
granted at prices which equal or exceed the market value of the stock on the
date of grant.
The Company's unvested options vest (i) over a three to five year service
vesting period, (ii) solely upon attainment of specified increases in the
Company's common stock price within five years from the date of grant, or (iii)
after a period of continued employment for up to three years after a stock
performance criterion has been met. Compensation costs for performance-based
stock option plans were $5 million, $54 million, and $18 million for 1998, 1997,
and 1996, respectively. The Company's 1998 stock option grants did not result in
compensation cost to the Company. At December 31, 1998, 35,000 performance-based
stock options had not met the stock performance requirement.
A summary of the status of the Company's stock options as of December 31, 1998,
1997, and 1996, and changes during the year ended on those dates is
presented below (shares in thousands):
-----------------------------------------------------
1998 1997
-----------------------------------------------------
WTD. AVG. Wtd. Avg.
SHARES EXER. PRICE Shares Exer. Price
- --------------------------------------------------------------------------------
Outstanding at
beginning of year 25,639 $ 8.70 22,104 $ 6.26
Granted at prices
equaling grant
date prices 1,403 34.96 5,930 16.59
Granted at prices
greater than grant
date prices 3,691 55.40 27 52.68
Exercised (3,303) 7.24 (2,250) 5.74
Forfeited (160) 25.93 (172) 13.69
- --------------------------------------------------------------------------------
Outstanding at end of
year 27,270 16.44 25,639 8.70
- ---------------------------=====================================================
Options exercisable
at end of year 19,363 20,798
- ---------------------------=====================================================
Options available for
future grant 4,984 10,344
- ---------------------------=====================================================
-------------------------
1996
-------------------------
Wtd. Avg.
Shares Exer. Price
-------------------------
Outstanding at beginning of year 18,435 $ 5.31
Granted at prices equaling grant date prices 5,760 9.02
Granted at prices greater than grant date prices -- --
Exercised (1,728) 5.21
Forfeited (363) 6.60
- --------------------------------------------------------------------------------
Outstanding at end of year 22,104 6.26
- -------------------------------------------------------=========================
Options exercisable at end of year 16,218
- -------------------------------------------------------=========================
Options available for future grant 2,919
- -------------------------------------------------------=========================
---------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Weighted average fair value of options
granted during the year $ 9.16 $ 6.17 $ 3.37
- -----------------------------------------=======================================
At prices equaling grant date prices $ 12.88 $ 6.18 $ 3.37
- -----------------------------------------=======================================
At prices greater than grant
date prices $ 7.74 $ 4.35 $ --
- -----------------------------------------=======================================
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted assumptions for
1998, 1997, and 1996, respectively: (i) dividend yields of 0.4%, 0.4%, and 0.3%,
(ii) expected volatility of 27%, 25%, and 25%, (iii) risk-free interest rates of
5.58%, 6.41%, and 6.19%, and (iv) expected life of six years for all years.
36
<PAGE> 21
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
December 31, 1998 (shares in thousands):
Options Outstanding Options Exercisable
---------------------------------------- ------------------------
Range of Number Wtd. Avg. Wtd. Avg. Number Wtd. Avg.
Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices at 12/31/98 Contractual Life Price at 12/31/98 Price
- ---------- ----------- ---------------- --------- ----------- ---------
$ 4 to 12 16,983 4.85 years $ 6.45 16,516 $ 6.38
12 to 20 4,486 8.01 15.90 2,535 15.90
20 to 40 2,106 8.70 29.82 305 20.52
over 40 3,695 9.03 55.41 7 56.08
------ ------
27,270 6.23 16.44 19,363 7.87
====== ======
The Company's restricted stock award plans provide for awards to officers and
certain key employees of the Company. For awards granted during 1996 and 1997,
restricted stock vests generally only (i) upon attainment of certain increases
in the market price of the Company's stock within five years from the date of
grant and (ii) after continued employment for a period of up to five years once
the stock performance criterion is met. No restricted stock awards were granted
in 1998.
All restricted stock awards entitle the participant to full dividend and voting
rights. Unvested shares are restricted as to disposition and subject to
forfeiture under certain circumstances. Upon issuance of restricted shares,
unearned compensation is charged to share-owners' equity for the cost of
restricted stock and is recognized as amortization expense ratably over the
vesting periods, as applicable. The amount of unearned compensation recognized
as expense for restricted stock awards was $8 million, $35 million, and $22
million for 1998, 1997, and 1996, respectively.
If compensation cost for the Company's grants for stock-based compensation plans
had been determined under SFAS 123, the Company's net income applicable to
common share owners, and basic and diluted net income per share applicable to
common share owners for 1998, 1997, and 1996 would approximate the pro forma
amounts below (in millions except per share data):
-----------------------------------------------------
1998 1997
-----------------------------------------------------
As Pro As Pro
Reported Forma Reported Forma
- --------------------------------------------------------------------------------
Net income applicable to
common share owners $ 141 $ 131 $ 169 $ 194
- ---------------------------=====================================================
Basic net income per
share applicable to
common share owners $ 0.36 $ 0.33 $ 0.44 $ 0.51
- ---------------------------=====================================================
Diluted net income per
share applicable to
common share owners $ 0.35 $ 0.32 $ 0.43 $ 0.49
- ---------------------------=====================================================
-------------------------
1996
-------------------------
As Pro
Reported Forma
- --------------------------------------------------------------------------------
Net income applicable to
common share owners $ 106 $ 113
- -------------------------------------------------------=========================
Basic net income per
share applicable to
common share owners $ 0.28 $ 0.30
- -------------------------------------------------------=========================
Diluted net income per
share applicable to
common share owners $ 0.28 $ 0.30
- -------------------------------------------------------=========================
The effects of applying SFAS 123 in this pro forma disclosure may not be
indicative of future results. SFAS 123 does not apply to awards prior to 1995,
and additional awards in future years are possible.
37
<PAGE> 22
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8 PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
- --------------------------------------------------------------------------------
PENSION PLANS: The Company sponsors a number of defined benefit pension plans
covering substantially all of its employees in North America and Europe.
Additionally, the Company participates in various multiemployer pension plans
worldwide. Total pension expense for multiemployer plans was $20 million in
1998, $15 million in 1997, and $11 million in 1996. The Company's funding policy
is to make annual contributions to the extent such contributions are tax
deductible but not less than the minimum contribution required by applicable
regulations.
OTHER POSTRETIREMENT PLANS: The Company sponsors unfunded defined benefit
postretirement plans providing healthcare and life insurance benefits to
substantially all U.S. and Canadian employees who retire or terminate after
qualifying for such benefits. European retirees are covered primarily by
government-sponsored programs and the specific cost to the Company for these
programs and other postretirement healthcare is not significant.
Summarized information on the Company's pension and other postretirement benefit
plans is as follows (in millions):
-----------------------------------------------------
OTHER
PENSION PLANS POSTRETIREMENT PLANS
-----------------------------------------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------
RECONCILIATION OF
BENEFIT OBLIGATION
Benefit obligation at
beginning of year $ 960 $ 588 $ 250 $ 197
Service cost 46 34 6 5
Interest cost 71 49 19 15
Plan participants'
contributions 8 3 3 2
Amendments 4 -- -- --
Actuarial loss 97 57 5 9
Acquisitions 48 268 8 38
Benefit payments (49) (36) (20) (16)
Curtailments (3) -- -- --
Settlements (1) -- -- --
Translation adjustments (10) (3) (2) --
- --------------------------------------------------------------------------------
Benefit obligation at
end of year $ 1,171 $ 960 $ 269 $ 250
- ---------------------------=====================================================
RECONCILIATION OF FAIR
VALUE OF PLAN ASSETS
Fair value of plan
assets at beginning of
year $ 1,030 $ 547 $ -- $ --
Actual return on plan
assets (11) 137 -- --
Employer contributions 15 17 17 14
Plan participants'
contributions 8 3 3 2
Benefit payments (49) (36) (20) (16)
Acquisitions 39 361 -- --
Settlements (1) -- -- --
Translation adjustments (17) 1 -- --
- --------------------------------------------------------------------------------
Fair value of plan
assets at end of year $ 1,014 $ 1,030 $ -- $ --
- ---------------------------=====================================================
FUNDED STATUS
Funded status at end of
year $ (157) $ 70 $ (269) $ (250)
Unrecognized transition
asset (4) (4) -- --
Unrecognized prior
service cost (asset) 2 (4) (95) (104)
Unrecognized net (gain)
loss 120 (71) 4 (2)
Fourth quarter
contribution 4 2 -- --
- --------------------------------------------------------------------------------
Net amount recognized $ (35) $ (7) $ (360) $ (356)
- ---------------------------=====================================================
AMOUNTS RECOGNIZED IN
THE BALANCE SHEET
CONSIST OF:
Prepaid benefit cost $ 104 $ 120 $ -- $ --
Accrued benefit
liability (166) (131) (360) (356)
Intangible asset 15 4 -- --
Other comprehensive
income adjustment 12 -- -- --
- --------------------------------------------------------------------------------
Net amount recognized $ (35) $ (7) $ (360) $ (356)
- ---------------------------=====================================================
WEIGHTED AVERAGE
ASSUMPTIONS
Discount rate 7.0% 7.4% 7.0% 7.5%
Expected return on plan
assets 9.3% 9.3% -- --
Rate of compensation
increase 4.9% 5.0% -- --
- --------------------------------------------------------------------------------
38
<PAGE> 23
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the defined benefit pension plans with accumulated benefit
obligations in excess of plan assets were $728 million, $622 million, and $541
million, respectively, as of December 31, 1998, and $63 million, $46 million,
and $0, respectively, as of December 31, 1997.
---------------------------------------
PENSION PLANS
---------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT
COST
Service cost $ 46 $ 34 $ 25
Interest cost 71 49 38
Expected return on plan assets (87) (57) (38)
Amortization of transition asset (1) (1) (1)
Amortization of prior service cost (1) (1) (1)
Recognized actuarial loss -- 1 2
- --------------------------------------------------------------------------------
Net periodic benefit cost 28 25 25
Curtailment gain (3) -- --
- --------------------------------------------------------------------------------
Net periodic benefit cost after
curtailments $ 25 $ 25 $ 25
- -----------------------------------------=======================================
---------------------------------------
OTHER POSTRETIREMENT PLANS
---------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT
COST
Service cost $ 6 $ 5 $ 5
Interest cost 19 15 16
Expected return on plan assets -- -- --
Amortization of transition asset -- -- --
Amortization of prior service cost (9) (9) (9)
Recognized actuarial loss -- -- --
- --------------------------------------------------------------------------------
Net periodic benefit cost 16 11 12
Curtailment gain -- -- --
- --------------------------------------------------------------------------------
Net periodic benefit cost after
curtailments $ 16 $ 11 $ 12
- -----------------------------------------=======================================
The primary U.S. postretirement benefit plan is a defined dollar benefit plan
limiting the effects of medical inflation to the lesser of 4.0% or the assumed
Consumer Price Index ("CPI"). The assumed CPI rates were 3.0% at December 31,
1998, and 3.5% at December 31, 1997. Because the 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.
The Company also sponsors qualified defined contribution plans covering
substantially all employees in the U.S. and Canada. Under its primary plans,
the Company matches 50% of participants' voluntary contributions up to a
maximum of 7% of the participants' compensation. The Company's contributions
to these plans were $27 million in 1998, $22 million in 1997, and $19 million in
1996.
- --------------------------------------------------------------------------------
9 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 are as follows (in millions):
---------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Current:
Domestic
Federal $ 7 $ 41 $ 70
State and local 15 15 12
European and Canadian 38 31 --
- --------------------------------------------------------------------------------
Total current provision 60 87 82
Deferred:
Domestic
Federal (2) (24) (6)
State and local (4) (3) 4
European and Canadian 2 5 --
Rate changes - United Kingdom (29) (58) --
- --------------------------------------------------------------------------------
Total deferred provision (33) (80) (2)
- --------------------------------------------------------------------------------
Total provision for income taxes $ 27 $ 7 $ 80
- -----------------------------------------=======================================
The tax benefit associated with management stock performance awards reduced
taxes payable by $31 million, $12 million, and $9 million in 1998, 1997, and
1996, respectively. These benefits are reflected as an increase to additional
paid-in capital. In 1998 the Company had foreign denominated loans resulting in
a tax benefit of $8 million and reducing taxes payable. This benefit is
reflected as a component of currency translations included in accumulated other
comprehensive income (loss). In 1997 and 1996 no such benefit was recognized.
The tax (benefit) liability associated with short-term currency swap agreements
(decreased) increased taxes payable by $(4) million, $14 million, and $8 million
in 1998, 1997, and 1996, respectively. The (benefit) liability is reflected as
a component of accumulated other comprehensive income (loss).
Income before income taxes from international operations used in computing the
Company's tax provision for 1998 and 1997 was approximately $151 million and
$162 million, respectively. These amounts are before interest and other
corporate cost allocations that are not deductible in international tax
computations. In 1996 income before income taxes from international operations
used in computing the Company's tax provision was not significant.
39
<PAGE> 24
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A reconciliation of the expected income tax expense at the statutory U.S.
federal rate to the Company's actual income tax provision follows (in millions):
---------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
U.S. federal statutory expense $ 59 $ 62 $ 68
State expense, net of
federal benefit -- 2 5
Taxation of European and
Canadian operations, net (21) (21) 1
Rate change benefit -
United Kingdom (29) (58) --
Valuation allowance provision 8 15 6
Nondeductible items 6 5 3
Other, net 4 2 (3)
- --------------------------------------------------------------------------------
$ 27 $ 7 $ 80
- -----------------------------------------=======================================
The Company's tax provision reflects favorable income tax treatment granted to
certain foreign operations under a tax holiday expiring by the year 2000. The
favorable effect amounted to $14 million and $17 million in 1998 and 1997,
respectively.
Deferred income taxes are recognized for tax consequences of temporary
differences between the financial and tax bases of existing assets and
liabilities by applying enacted statutory tax rates to such differences.
Significant components of the Company's deferred tax liabilities and assets as
of December 31 are as follows (in millions):
-------------------------
1998 1997
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Franchise assets $ 4,851 $ 4,127
Property, plant, and equipment 472 419
- --------------------------------------------------------------------------------
Total deferred tax liabilities 5,323 4,546
Deferred tax assets:
Net operating loss carryforwards (387) (328)
Employee and retiree benefit accruals (210) (328)
Alternative minimum tax credits (137) (115)
Other, net (153) (95)
- --------------------------------------------------------------------------------
Total deferred tax assets (887) (866)
Valuation allowances for deferred tax assets 205 246
- --------------------------------------------------------------------------------
Net deferred tax liabilities 4,641 3,926
Current deferred tax assets 74 70
- --------------------------------------------------------------------------------
Total deferred tax liabilities $ 4,715 $ 3,996
- -------------------------------------------------------=========================
Deferred tax assets are recognized for the tax benefit of deducting timing
differences and foreign, federal, and state net operating loss and tax credit
carryforwards. Valuation allowances are recognized on these assets if it is
believed some or all of the deferred tax assets will not be realized. Management
believes the majority of deferred tax assets will be realized because of the
depletion of certain significant tax deductions and anticipated future taxable
income resulting from operations. Valuation allowances of $205 million and $246
million as of December 31, 1998 and 1997, respectively, were established for the
remaining deferred tax assets. Included in the valuation allowance as of
December 31, 1998 and 1997, were $132 million and $144 million, respectively,for
net operating loss carryforwards of acquired companies. Previously
established valuation allowances for net operating losses of acquired companies
were reduced in 1998 and 1997 by $12 million and $13 million, respectively.
These reversals are reflected as a reduction to franchise assets.
Federal tax operating loss carryforwards total $896 million. The majority of
these carryforwards were acquired through the purchase of various bottling
companies. These carryforwards are available in varying amounts to offset future
federal taxable income through their expiration in years 2000 through 2010.
At December 31, 1998 and 1997, the Company's foreign subsidiaries had $263
million and $112 million in distributable earnings, respectively, exclusive of
amounts, if remitted in the future, would result in little or no tax under
current laws. The Company's earnings from foreign subsidiaries are considered to
be indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been made for these earnings. Determination of the amount
of unrecognized deferred tax liability on these undistributed earnings is not
practicable. Upon distribution of foreign subsidiary earnings in the form of
dividends or otherwise, the Company would be subject to both U.S. income taxes
(subject to an adjustment for foreign tax credits) and withholding taxes payable
to the various foreign countries.
The United Kingdom's income tax rate was reduced from 33% to 31% in July 1997
effective April 1, 1997, and from 31% to 30% in July 1998 effective April
1, 1999. These rate changes reduced deferred tax liabilities associated with
the Company's operations in the United Kingdom by $29 million and $58
million in 1998 and 1997, respectively. These deferred tax liability
reductions were recognized as credits to income tax expense.
10 PREFERRED STOCK
- --------------------------------------------------------------------------------
In 1998 the Board of Directors authorized the Company to issue 120,000 shares of
$1 par value voting convertible preferred stock with a stated value of $100 per
share ("Bellingham series") and 450,000 shares of $1 par value voting
convertible preferred stock with a stated value of $100 per share ("Great Plains
series"). In connection with the June 1998 acquisition of The Coca-Cola Bottling
Company of Bellingham, the Company issued 96,900 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
40
<PAGE> 25
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
30, 2001, at which time all shares must be converted. The Company issued 392,464
Great Plains series shares of preferred stock on August 6, 1998, in
connection with the acquisition of Great Plains Bottlers and Canners, Inc. 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. As
of December 31, 1998, no shares of the Bellingham or Great Plains series have
been converted.
In connection with the acquisition of Ouachita in February 1996, the Company
issued 936,965 of 1,110,000 shares of voting convertible preferred stock
authorized, Ouachita Series A ("Series A"), and issued 95,955 of 350,000 shares
of voting convertible preferred stock authorized, Ouachita Series B ("Series
B"). Series A paid quarterly dividends equaling 4% annually. Series B did not
pay dividends. During 1997 and 1996 all shares of Series A and Series B
preferred stock were converted into common stock. As a result of these
conversions, additional paid-in capital increased by approximately $94 million
and $25 million and treasury stock decreased by approximately $40 million and
$28 million in 1997 and 1996, respectively.
The Company issued 1,000,000 shares of nonvoting convertible preferred stock
with a stated value of $35 per share in connection with the 1993 acquisition of
the Coca-Cola Bottling Company of Northeast Arkansas, Inc. During 1996 all
outstanding shares of this preferred stock issue were converted into common
stock. The increase in additional paid-in capital resulting from the difference
between the recorded value of the converted preferred stock and the cost of
treasury stock issued was approximately $15 million.
11 SHARE REPURCHASES
- --------------------------------------------------------------------------------
Under the April 1996 share repurchase program authorizing the repurchase of up
to 30 million shares, the Company can repurchase shares in the open market and
in privately negotiated transactions. In 1998 the Company repurchased
approximately 15.5 million shares of common stock in 1998 for an aggregate cost
of approximately $455 million. In 1997 and 1996, no repurchases were made under
this program.
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.
- --------------------------------------------------------------------------------
12 EARNINGS PER SHARE
- --------------------------------------------------------------------------------
The following table (in millions except per share data) provides a
reconciliation between basic and diluted per share amounts:
---------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Net Income $ 142 $ 171 $ 114
Preferred stock dividends 1 2 8
- --------------------------------------------------------------------------------
Net Income Applicable to Common Share
Owners $ 141 $ 169 $ 106
- -----------------------------------------=======================================
Basic Average Common Shares
Outstanding 393 383 373
Effect of Dilutive Securities:
Stock compensation awards 13 13 7
- --------------------------------------------------------------------------------
Diluted Average Common Shares
Outstanding 406 396 380
- -----------------------------------------=======================================
Basic Net Income Per Share
Applicable to Common Share Owners $ 0.36 $ 0.44 $ 0.28
- -----------------------------------------=======================================
Diluted Net Income Per Share
Applicable to Common Share Owners $ 0.35 $ 0.43 $ 0.28
- -----------------------------------------=======================================
On April 21, 1997, the Company's share owners approved an amendment to the
Company's certificate of incorporation to increase authorized common shares from
500 million to 1 billion and to effect a 3-for-1 stock split with no change in
par values, effective for share owners of record on May 1, 1997. To reflect the
split, common stock was increased and additional paid-in capital was decreased
by $295 million. For periods prior to the effective date of the stock split,
outstanding shares and per share data contained in this report, except for
dividends per share, have been restated to reflect the impact of the split.
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 quarterly dividend increase was
effective and payable beginning July 1, 1998. Dividends are declared at the
discretion of the Company's Board of Directors.
41
<PAGE> 26
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
13 COMPREHENSIVE INCOME (LOSS)
- --------------------------------------------------------------------------------
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS 130
establishes new rules of reporting comprehensive income (loss), comprised of net
income and other adjustments to comprehensive income. Other adjustments to
comprehensive income include minimum pension liability adjustments and currency
items such as foreign currency translation adjustments and hedges of net
investments in international subsidiaries.
The Company provides income taxes on its currency items, except for income taxes
on the impact of currency translations, as earnings from international
subsidiaries are considered to be indefinitely reinvested.
A summary of the Company's accumulated other comprehensive income (loss) items
and related tax effects is presented below (in millions):
---------------------------------------
Currency Pension
Items Adjustments Total
- --------------------------------------------------------------------------------
Balance, December 31, 1995 $ 38 $ -- $ 38
1996 Pre-Tax Activity (17) -- (17)
- --------------------------------------------------------------------------------
Balance, December 31, 1996 $ 21 $ -- $ 21
1997 Pre-Tax Activity (15) -- (15)
1997 Tax Effects (22) -- (22)
- --------------------------------------------------------------------------------
Balance, December 31, 1997 $ (16) $ -- $ (16)
1998 Pre-Tax Activity 9 (12) (3)
1998 Tax Effects 12 5 17
- --------------------------------------------------------------------------------
Balance, December 31, 1998 $ 5 $ (7) $ (2)
- -----------------------------------------=======================================
14 RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
Subsequent to the January 1999 acquisitions, The Coca-Cola Company owned
approximately 40% of the Company's outstanding common shares. The Company
generates approximately 90% of its product sales volume from the sale of
products of The Coca-Cola Company. The Company and The Coca-Cola Company have
entered into various transactions and agreements in the ordinary course of
business. Certain of these transactions and agreements are disclosed in other
sections of the accompanying financial statements and related notes. The
following outlines other significant transactions between the Company and The
Coca-Cola Company and its affiliates:
MARKETING AND OTHER 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. In 1998, 1997, and 1996 total direct
marketing support paid or payable to the Company, or on behalf of the Company by
The Coca-Cola Company, approximated $899 million, $604 million, and $448
million, respectively. Pursuant to cooperative advertising and trade
arrangements with The Coca-Cola Company, the Company paid The Coca-Cola Company
$173 million, $144 million, and $123 million in 1998, 1997, and 1996,
respectively, for local media and marketing program expense. In addition,
funding for costs associated with market or infrastructure development paid or
payable to the Company by The Coca-Cola Company approximated $324 million, $190
million, and $120 million in 1998, 1997, and 1996, respectively. The increases
in promotional programs principally reflect the Company's continued growth and
the effect of recent acquisitions. The Coca-Cola Company is under no obligation
to continue past levels of funding.
FOUNTAIN SYRUP AND PACKAGE PRODUCT SALES: The Company sells fountain syrup back
to The Coca-Cola Company in certain territories and delivers this syrup to
certain major fountain accounts of The Coca-Cola Company. The Company will, on
behalf of The Coca-Cola Company, invoice and collect amounts receivable for
these fountain sales. In addition, the Company also sells bottle and can
beverage products to The Coca-Cola Company at prices that are generally similar
to the prices charged by the Company to its major customers. During 1998, 1997,
and 1996 The Coca-Cola Company paid the Company approximately $383 million, $345
million, and $295 million, respectively, for fountain syrup, bottle and can
products, and delivery and billing services.
42
<PAGE> 27
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
15 ENVIRONMENTAL MATTERS
- --------------------------------------------------------------------------------
The Company incurs costs to satisfy various federal and state regulations
involving materials discharge, wastewater treatment, and underground storage
tanks. The Company believes any amount it may be required to pay in excess of
amounts previously funded or accrued would not have a materially adverse effect
on the Company's financial position, cash flows, or results of operations.
At December 31, 1998, there were six federal and one state Superfund sites for
which the Company's involvement or liability as a potentially responsible party
("PRP") was unresolved. The Company believes any ultimate liability under these
PRP designations will not have a materially adverse effect on its financial
position, cash flows, or results of operations. In addition, there were 18
federal and seven state sites for which it had been concluded the Company either
had no responsibility, the ultimate liability amounts would be less than
$100,000, or payments made to date by the Company would be sufficient to satisfy
the Company's liability.
16 GEOGRAPHIC OPERATING INFORMATION
- --------------------------------------------------------------------------------
The Company operates in one industry: the marketing, distribution, and
production of bottle and can liquid nonalcoholic refreshments. The Company
operates in 46 states in the United States, the District of Columbia, and in the
10 provinces of Canada (collectively referred to as the "North American"
territories), and in Belgium, Great Britain, Luxembourg, the Netherlands, and
most of France (collectively referred to as the "European" territories).
The following presents long-lived assets as of December 31, 1998 and 1997,
and net operating revenues for the years ended December 31, 1998, 1997,
and 1996, by geographic territory (in millions):
-------------------------
LONG-LIVED ASSETS
-------------------------
1998 1997
- --------------------------------------------------------------------------------
North American $ 14,121 $ 11,174
European 4,726 4,500
- --------------------------------------------------------------------------------
Consolidated $ 18,847 $ 15,674
- -------------------------------------------------------=========================
---------------------------------------
NET OPERATING REVENUES (A)
---------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
North American $ 10,056 $ 8,216 $ 7,091
European 3,358 3,062 830
- --------------------------------------------------------------------------------
Consolidated $ 13,414 $ 11,278 $ 7,921
- -----------------------------------------=======================================
(A) Net operating revenues include results of companies acquired beginning near
or after the dates of acquisition. Therefore, reported information is not
indicative of full-year results in most periods presented.
The Company has no material amounts of sales or transfers between its North
American and European territories and no significant United States export sales.
17 COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
In North America, the Company purchases PET (plastic) bottles from manufacturing
cooperatives. The Company has guaranteed payment of up to $308 million of
indebtedness owed by these manufacturing cooperatives to third parties. At
December 31, 1998, these cooperatives had approximately $167 million of
indebtedness guaranteed by the Company. The Company has also issued letters of
credit aggregating $121 million primarily under self-insurance programs.
As of December 31, 1998, the Company has entered into long-term purchase
agreements with various suppliers. Subject to each supplier's quality and
performance, the aggregate purchase commitments covered by these agreements
during the next five years are as follows (in millions): 1999 - $1,668; 2000 -
$1,591; 2001 - $1,579; 2002 - $970; and 2003 - $132.
The Company leases office and warehouse space, computer hardware, and machinery
and equipment under lease agreements expiring at various dates through 2019. At
December 31, 1998, future minimum lease payments under noncancellable operating
leases aggregate approximately $118 million. Rent expense was approximately $85
million, $82 million, and $35 million during 1998, 1997, and 1996, respectively.
In 1996 the Company recognized an award of $10 million in settlement of claims
against certain suppliers. The amount of the settlement award is included as a
reduction of cost of sales.
The Company is a defendant in various matters of litigation generally arising
out of the normal course of business. Although it is difficult to predict the
ultimate outcome of these cases, management believes, based on discussion with
counsel, that any ultimate liability would not materially affect the Company's
financial position, results of operations, or liquidity.
43
<PAGE> 28
COCA-COLA ENTERPRISES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
18 QUARTERLY FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Unaudited quarterly financial information follows (in millions except per share
data):
---------------------------------------
1998
---------------------------------------
FIRST(A) SECOND THIRD
- --------------------------------------------------------------------------------
Net operating revenues $ 2,958 $ 3,687 $ 3,528
- -----------------------------------------=======================================
Gross profit $ 1,082 $ 1,390 $ 1,321
- -----------------------------------------=======================================
Net (loss) income applicable to
common share owners $ (51) $ 111 $ 115(B)
- -----------------------------------------=======================================
Basic net (loss) income per share
applicable to common share owners $ (0.13) $ 0.28 $ 0.29
- -----------------------------------------=======================================
Diluted net (loss) income per share
applicable to common share owners $ (0.13) $ 0.27 $ 0.28
- -----------------------------------------=======================================
-------------------------
1998
-------------------------
FISCAL
FOURTH(A) YEAR
- --------------------------------------------------------------------------------
Net operating revenues $ 3,241 $13,414
- -------------------------------------------------------=========================
Gross profit $ 1,230 $ 5,023
- -------------------------------------------------------=========================
Net (loss) income applicable to
common share owners $ (34) $ 141
- -------------------------------------------------------=========================
Basic net (loss) income per share
applicable to common share owners $ (0.09) $ 0.36(C)
- -------------------------------------------------------=========================
Diluted net (loss) income per share
applicable to common share owners $ (0.09) $ 0.35(C)
- -------------------------------------------------------=========================
---------------------------------------
1997
---------------------------------------
First(A) Second Third
- --------------------------------------------------------------------------------
Net operating revenues $ 2,141 $ 2,905 $3,183
- -----------------------------------------=======================================
Gross profit $ 800 $ 1,084 $1,166
- -----------------------------------------=======================================
Net (loss) income applicable to
common share owners $ (35) $ 111 $ 112(B)
- -----------------------------------------=======================================
Basic net (loss) income per share
applicable to common share owners $ (0.09) $ 0.29 $ 0.29
- -----------------------------------------=======================================
Diluted net (loss) income per share
applicable to common share owners $ (0.09) $ 0.28 $ 0.28
- -----------------------------------------=======================================
Basic pro forma net (loss) income
per common share(D) $ (0.18) $ 0.27 $ 0.26
- -----------------------------------------=======================================
Diluted pro forma net (loss) income
per common share(D) $ (0.18) $ 0.26 $ 0.25
- -----------------------------------------=======================================
-------------------------
1997
-------------------------
Fiscal
Fourth(A) Year
- --------------------------------------------------------------------------------
Net operating revenues $ 3,049 $11,278
- -------------------------------------------------------=========================
Gross profit $ 1,132 $ 4,182
- -------------------------------------------------------=========================
Net (loss) income applicable to
common share owners $ (19) $ 169
- -------------------------------------------------------=========================
Basic net (loss) income per share
applicable to common share owners $ (0.05) $ 0.44
- -------------------------------------------------------=========================
Diluted net (loss) income per share
applicable to common share owners $ (0.05) $ 0.43(C)
- -------------------------------------------------------=========================
Basic pro forma net (loss) income
per common share(D) $ (0.05) $ 0.30
- -------------------------------------------------------=========================
Diluted pro forma net (loss) income
per common share(D) $ (0.05) $ 0.29(C)
- -------------------------------------------------------=========================
For quarterly reporting, the Company reports on the Friday closest to the end of
the quarterly calendar period for reporting convenience.
(A) Each quarter presented includes 91 days, except for the first quarter of
1998 (93 days), the fourth quarter of 1998 (90 days), the first quarter of
1997 (87 days), and the fourth quarter of 1997 (96 days).
(B) In the third quarters of 1998 and 1997 the Company reduced its deferred tax
liabilities and recognized a $29 million ($0.07 per share) credit and a $58
million ($0.15 per share) credit, respectively, to income tax expense as a
result of the United Kingdom's decisions to reduce the corporate income tax
rate.
(C) Due to the method required by SFAS No. 128 to calculate per share data, the
quarterly per share data does not total to the full-year per share data.
(D) Pro forma net income (loss) per share presents information as if certain
international and domestic 1997 acquisitions described in Note 2 were
effective January 1, 1997.
44
<PAGE> 29
COCA-COLA ENTERPRISES INC.
REPORT OF MANAGEMENT
- --------------------------------------------------------------------------------
Management has prepared the accompanying consolidated financial statements
appearing in this Annual Report and is responsible for their integrity and
objectivity. The consolidated financial statements, including amounts that are
based on management's best estimates and judgment, have been prepared in
conformity with generally accepted accounting principles and are free of
material misstatement. Management also prepared other information in this Annual
Report and is responsible for its accuracy and consistency with the consolidated
financial statements.
Management maintains a system of internal accounting controls and
procedures over financial reporting designed to provide reasonable assurance, at
an appropriate cost/benefit relationship, that assets are safeguarded and that
transactions are authorized, recorded, and reported properly. The internal
accounting control system is augmented by a program of internal audits and
reviews by management, written policies and guidelines, careful selection and
training of qualified personnel, and a written Code of Business Conduct adopted
by the Board of Directors applicable to all employees of the Company and its
subsidiaries. Management believes that the Company's internal accounting
controls provide reasonable assurance (i) that assets are safeguarded against
material loss from unauthorized use or disposition and (ii) that the financial
records are reliable for preparing consolidated financial statements and other
data and maintaining accountability for assets.
The Audit Committee of the Board of Directors, composed solely of Directors
who are not officers of the Company or The Coca-Cola Company, meets periodically
with the independent auditors, management, and the officer of the Company
directing internal audit to discuss internal accounting control, auditing, and
financial reporting matters. The Committee reviews with the independent auditors
the scope and results of the audit effort. The Committee also meets with the
independent auditors and the Company's Director of Internal Audit, without
management present, to ensure that the independent auditors and the Company's
Director of Internal Audit have free access to the Committee.
The independent auditors, Ernst & Young LLP, are recommended by the Audit
Committee of the Board of Directors and selected by the Board of Directors and
ratified by the Company's share owners. Ernst & Young LLP is engaged to audit
the consolidated financial statements of Coca-Cola Enterprises Inc. and
subsidiaries and conduct such tests and related procedures as Ernst & Young LLP
deems necessary in conformity with generally accepted auditing standards. The
opinion of the independent auditors, based upon their audit of the consolidated
financial statements, is contained in this Annual Report.
/s/Henry A. Schimberg /s/John R. Alm /s/Michael P. Coghlan
HENRY A. SCHIMBERG JOHN R. ALM MICHAEL P. COGHLAN
President and Executive Vice Vice President,
Chief Executive Officer President and Chief Controller and
Financial Officer Principal Accounting
Officer
Atlanta, GA
January 18, 1999
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. as of December 31, 1998 and 1997, and the related consolidated
statements of income, share-owners' equity, and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 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, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Atlanta, GA
January 18, 1999
45
<PAGE> 30
COCA-COLA ENTERPRISES INC.
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
FISCAL YEAR
---------------------------------------------------
1998 1997(A) 1996(B)
- --------------------------------------------------------------------------------
(in millions except
per share data) REPORTED Pro Forma Reported Pro Forma Reported
- --------------------------------------------------------------------------------
OPERATIONS SUMMARY
Net operating revenues $ 13,414 $ 12,377 $ 11,278 $ 10,307 $ 7,921
Cost of sales 8,391 7,810 7,096 6,444 4,896
- --------------------------------------------------------------------------------
Gross profit 5,023 4,567 4,182 3,863 3,025
Selling, delivery,
and administrative
expenses 4,154 3,854 3,462 3,155 2,480
- --------------------------------------------------------------------------------
Operating income 869 713 720 708 545
Interest expense, net 701 615 536 564 351
Other nonoperating
(income) deductions,
net (1) 8 6 (5) --
Gain from sale of
bottling operations -- -- -- -- --
- --------------------------------------------------------------------------------
Income (loss) before
income taxes 169 90 178 149 194
Income tax expense
(benefit) before rate
change benefit 56 31 65 61 80
Income tax rate change
(benefit) expense (29) (58) (58) -- --
- --------------------------------------------------------------------------------
Net income (loss) before
cumulative effect of
changes in accounting
principles 142 117 171 88 114
Cumulative effect of
changes in accounting
principles -- -- -- -- --
- --------------------------------------------------------------------------------
Net income (loss) 142 117 171 88 114
Preferred stock dividends 1 2 2 9 8
- --------------------------------------------------------------------------------
Net income (loss)
applicable to common
share owners $ 141 $ 115 $ 169 $ 79 $ 106
- ------------------------------==================================================
OTHER OPERATING DATA
Depreciation expense $ 725 $ 615 $ 566 $ 483 $ 392
Amortization expense 395 426 380 319 235
AVERAGE COMMON SHARES
OUTSTANDING (G)(H)
Basic 393 383 383 373 373
Diluted 406 396 396 380 380
PER SHARE DATA (G)(H)
Basic net income (loss)
per common share before
cumulative effect of
changes in accounting
principles $ 0.36 $ 0.30 $ 0.44 $ 0.21 $ 0.28
Diluted net income (loss)
per common share before
cumulative effect of
changes in accounting
principles 0.35 0.29 0.43 0.21 0.28
Basic net income (loss)
per share applicable
to common share owners 0.36 0.30 0.44 0.21 0.28
Dilutive net income
(loss) per share
applicable to common
share owners 0.35 0.29 0.43 0.21 0.28
Dividends per common share 0.13(I) 0.10 0.10 0.033 0.033
Closing stock price 35.75 35.56 35.56 16.16 16.16
YEAR-END FINANCIAL
POSITION
Property, plant, and
equipment, net $ 4,891 $ 3,862 $ 3,862 $ 3,156 $ 2,812
Franchises and other
noncurrent assets, net 13,956 11,812 11,812 9,816 7,103
Total assets 21,132 17,487 17,487 14,674 11,234
Long-term debt 10,745 8,792 8,792 7,315 5,305
Share-owners' equity 2,438 1,782 1,782 1,550 1,550
- --------------------------------------------------------------------------------
Fiscal periods presented are calendar years, beginning after 1991, and fiscal
years ending on the Friday nearest December 31 prior to 1991. The Company
acquired subsidiaries in each year presented and divested subsidiaries in
certain periods. Such transactions, except for: (i) the 1997 acquisitions of
Amalgamated Beverages Great Britain Limited ("Great Britain Bottler"), The
Coca-Cola Bottling Company of New York, Inc. ("Coke New York"), and Coca-Cola
Beverages Ltd. ("Coke Canada"), (ii) the 1996 acquisition of Coca-Cola
Enterprise S.A., Coca-Cola Production S.A., and S.A. Beverage Sales Holding
N.V. (collectively "the French and Belgian bottlers"), (iii) the 1991
acquisition of Johnston Coca-Cola Bottling Group, Inc. ("Johnston"), and (iv)
gains from the sale of certain bottling operations, 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) The 1997 pro forma Operations Summary, Other Operating Data, and Per Share
Data give effect to the following acquisitions as though each had been
owned for a full year beginning January 1, 1997: the Great Britain Bottler,
Coke New York, and Coke Canada.
(B) The 1996 pro forma Operations Summary, Other Operating Data, Per Share
Data, and Year-End Financial Position give effect to the following
acquisitions as though each had been owned for a full year beginning
January 1, 1996: the Belgian, Great Britain, and French bottlers, Coca-Cola
Bottling Company West, Inc., Grand Forks Coca-Cola Bottling Co., and
Ouachita Coca-Cola Bottling Company, Inc.
46
<PAGE> 31
COCA-COLA ENTERPRISES INC.
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
----------------------------------------------------
FISCAL YEAR
----------------------------------------------------
(in millions except
per share data) 1995(C) 1994 1993(D) 1992(E)
- --------------------------------------------------------------------------------
OPERATIONS SUMMARY
Net operating revenues $ 6,773 $ 6,011 $ 5,465 $ 5,127
Cost of sales 4,267 3,703 3,372 3,219
- --------------------------------------------------------------------------------
Gross profit 2,506 2,308 2,093 1,908
Selling, delivery,
and administrative
expenses 2,038 1,868 1,708 1,602
- --------------------------------------------------------------------------------
Operating income 468 440 385 306
Interest expense, net 326 310 328 312
Other nonoperating
(income) deductions,
net 6 3 2 6
Gain from sale of
bottling operations 9 -- -- --
- --------------------------------------------------------------------------------
Income (loss) before
income taxes 145 127 55 (12)
Income tax expense
(benefit) before rate
change benefit 63 58 30 3
Income tax rate change
(benefit) expense -- -- 40 --
- --------------------------------------------------------------------------------
Net income (loss) before
cumulative effect of
changes in accounting
principles 82 69 (15) (15)
Cumulative effect of
changes in accounting
principles -- -- -- (171)
- --------------------------------------------------------------------------------
Net income (loss) 82 69 (15) (186)
Preferred stock dividends 2 2 -- --
- --------------------------------------------------------------------------------
Net income (loss)
applicable to common
share owners $ 80 $ 67 $ (15) $ (186)
================================================================================
OTHER OPERATING DATA
Depreciation expense $ 318 $ 282 $ 254 $ 227
Amortization expense 211 179 165 162
AVERAGE COMMON SHARES
OUTSTANDING(G)(H)
Basic 386 386 387 384
Diluted 390 388 387 384
PER SHARE DATA(G)(H)
Basic net income (loss)
per common share before
cumulative effect of
changes in accounting
principles $ 0.21 $ 0.17 $ (0.04) $ (0.04)
Diluted net income (loss)
per common share before
cumulative effect of
changes in accounting
principles 0.20 0.17 (0.04) (0.04)
Basic net income (loss)
per share applicable
to common share owners 0.21 0.17 (0.04) (0.49)
Dilutive net income
(loss) per share
applicable to common
share owners 0.20 0.17 (0.04) (0.49)
Dividends per common share 0.017 0.017 0.017 0.017
Closing stock price 8.97 6.00 5.09 4.09
YEAR-END FINANCIAL
POSITION
Property, plant, and
equipment, net $ 2,158 $ 1,963 $ 1,890 $ 1,733
Franchises and other
noncurrent assets, net 5,924 5,965 6,046 5,651
Total assets 9,064 8,738 8,682 8,085
Long-term debt 4,201 4,187 4,391 4,131
Share-owners' equity 1,435 1,339 1,260 1,254
- --------------------------------------------------------------------------------
-----------------------------------------------------
FISCAL YEAR
-----------------------------------------------------
(in millions except 1991(F)
per share data) Pro Forma Reported 1990 1989
- --------------------------------------------------------------------------------
OPERATIONS SUMMARY
Net operating revenues $ 5,027 $ 3,915 $ 3,933 $ 3,822
Cost of sales 3,170 2,420 2,400 2,350
- --------------------------------------------------------------------------------
Gross profit 1,857 1,495 1,533 1,472
Selling, delivery,
and administrative
expenses 1,687 1,375 1,208 1,162
- --------------------------------------------------------------------------------
Operating income 170 120 325 310
Interest expense, net 312 210 200 193
Other nonoperating
(income) deductions,
net 3 2 (3) (10)
Gain from sale of
bottling operations -- -- 56 11
- --------------------------------------------------------------------------------
Income (loss) before
income taxes (145) (92) 184 138
Income tax expense
(benefit) before rate
change benefit (17) (9) 91 66
Income tax rate change
(benefit) expense -- -- -- --
- --------------------------------------------------------------------------------
Net income (loss) before
cumulative effect of
changes in accounting
principles (128) (83) 93 72
Cumulative effect of
changes in accounting
principles -- -- -- --
- --------------------------------------------------------------------------------
Net income (loss) (128) (83) 93 72
Preferred stock dividends 9 9 16 18
- --------------------------------------------------------------------------------
Net income (loss)
applicable to common
share owners $ (137) $ (92) $ 77 $ 54
================================================================================
OTHER OPERATING DATA
Depreciation expense $ 205 $ 160 $ 150 $ 148
Amortization expense 125 91 86 81
AVERAGE COMMON SHARES
OUTSTANDING(G)(H)
Basic 345 345 357 388
Diluted 345 345 357 388
PER SHARE DATA(G)(H)
Basic net income (loss)
per common share before
cumulative effect of
changes in accounting
principles $ (0.35) $ (0.27) $ 0.22 $ 0.14
Diluted net income (loss)
per common share before
cumulative effect of
changes in accounting
principles (0.35) (0.27) 0.22 0.14
Basic net income (loss)
per share applicable
to common share owners (0.35) (0.27) 0.22 0.14
Dilutive net income
(loss) per share
applicable to common
share owners (0.35) (0.27) 0.22 0.14
Dividends per common share 0.017 0.017 0.017 0.017
Closing stock price 5.13 5.13 5.17 5.33
YEAR-END FINANCIAL
POSITION
Property, plant, and
equipment, net $ 1,706 $ 1,706 $ 1,373 $ 1,286
Franchises and other
noncurrent assets, net 4,265 4,265 3,153 2,952
Total assets 6,677 6,677 5,021 4,732
Long-term debt 4,091 4,091 2,537 2,305
Share-owners' equity 1,442 1,442 1,627 1,680
- --------------------------------------------------------------------------------
(C) In January 1995 the Company sold its 50% ownership interest in The
Coca-Cola Bottling Company of the Mid South ("Mid South") to Ouachita. The
Company's interest in Mid South was reacquired through the Ouachita
acquisition in February 1996.
(D) A one-time charge of $40 million in income tax expense to increase deferred
income taxes resulted from a 1% increase in the corporate marginal income
tax rate in connection with the U.S. Omnibus Budget Reconciliation Act of
1993.
(E) In 1992 the Company adopted SFAS 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and SFAS 109 "Accounting for
Income Taxes." Fiscal periods prior to 1992 were not restated for these
accounting changes.
(F) The 1991 pro forma Operations Summary, Other Operating Data 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. A restructuring charge in
1991 of $152 million is included in selling, delivery, and administrative
expenses.
(G) For years beginning before 1998, information was adjusted for a 3-for-1
stock split effective in 1997.
(H) In 1997 the Company adopted SFAS 128, "Earnings Per Share," and restated
average common shares and per share data.
(I) Effective July 1, 1998, the Company increased its regular quarterly
dividend from $0.025 to $0.04.
47
<PAGE> 1
EXHIBIT 21
COCA-COLA ENTERPRISES INC.
AND ITS SUBSIDIARIES(1)
<TABLE>
<CAPTION>
Owner of
Shares
Jurisdiction (Unless
In Which Otherwise Noted,
Name Organized Ownership is 100%)
- ---------------------------- ---------------- ------------------
<S> <C> <C>
Coca-Cola Enterprises Inc. (Registrant)("CCE") Delaware N/A
Trade names:
The Angleton Coca-Cola Bottling Company
The Atlanta Coca-Cola Bottling Company
Atlanta Ice Makers
Austin Coca-Cola Bottling Company
Beaumont Coca-Cola Bottling Company
The Brenham Coca-Cola Bottling Company
Brevard Coca-Cola Bottling Company
Brooksville Coca-Cola Bottling Company
CCE Bottling Group
CCE-South
Coca-Cola Bottling Company of Cody
Coca-Cola Bottling Company of Colorado/
Northern Wyoming
Coca-Cola Bottling Company of Gillette
Coca-Cola Bottling Company of Goodland
Coca-Cola Bottling Company of Greeley
Coca-Cola Bottling Company of Miami
Coca-Cola Bottling Company of New England
The Coca-Cola Bottling Company of New Iberia
Coca-Cola Bottling Company of North Texas
Coca-Cola Bottling Company of Northern Wyoming
The Coca-Cola Bottling Company of Paris
Coca-Cola Bottling Company of Providence
Coca-Cola Bottling Company of Riverton
Coca-Cola Bottling Company of Sheridan
The Coca-Cola Bottling Company of Sherman
Coca-Cola Bottling Company of the
Virgin Islands (St. Croix)
Coca-Cola Bottling Company of the
Virgin Islands (St. Thomas)
Coca-Cola Bottling Company of West Point/LaGrange
Colorado Coca-Cola Bottling Company
Colorado Springs Coca-Cola Bottling Company
The Conroe Coca-Cola Bottling Company
Dallas Coca-Cola Bottling Company
Daytona Coca-Cola Bottling Company
Denver Coca-Cola Bottling Company
Dr Pepper Bottling Company of New Orleans
The El Campo Coca-Cola Bottling Company
Enterprises Media
Evangeline Coca-Cola Bottling Company
Florida Coca-Cola Bottling Company
Ft. Myers Coca-Cola Bottling Company
Ft. Pierce Coca-Cola Bottling Company
Gainesville Coca-Cola Bottling Company
Highlands Coca-Cola Bottling Company
Houston Coca-Cola Bottling Company
Hygeia Coca-Cola Bottling Company
Jacksonville Coca-Cola Bottling Company
Lamar Coca-Cola Bottling Company
The Louisiana Coca-Cola Bottling Company, Limited
The Mid-Atlantic Coca-Cola Bottling Company
Ocala Coca-Cola Bottling Company
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Owner of
Shares
Jurisdiction (Unless
In Which Otherwise Noted,
Name Organized Ownership is 100%)
- ---------------------------- ---------------- ------------------
<S> <C> <C>
Orlando Coca-Cola Bottling Company
Pueblo Coca-Cola Bottling Company
Punta Gorda Coca-Cola Bottling Company
Rome Coca-Cola Bottling Company
Sarasota Coca-Cola Bottling Company
St. Petersburg Coca-Cola Bottling Company
Tallahassee Coca-Cola Bottling Company
Tampa Coca-Cola Bottling Company
Tyler Coca-Cola Bottling Company
Valdosta Coca-Cola Bottling Company
Waco Coca-Cola Bottling Company
Bottling Holdings (International) Inc. ("BHI") Delaware CCE
Coca-Cola Enterprises UK Limited ("CCEUK") United Kingdom BHI
Coca-Cola Enterprises Great Britain plc ("CCEGB") United Kingdom CCEUK
Amalgamated Beverages Great Britain Limited ("ABGB") United Kingdom CCEGB
Coca-Cola & Schweppes Beverages Limited United Kingdom ABGB
Coca-Cola Production France BHI
Coca-Cola Entreprise France BHI (99%)
Bottling Holdings (Netherlands) BV ("BHN") Netherlands BHI
Coca-Cola Beverages Nederland BV Netherlands BHN
Enterprises KOC Acquisition Company Ltd. ("KOC") Canada BHN
Bottling Holdings (Canada) ULC Canada KOC
Coca-Cola Bottling Ltd. Canada KOC
BCI Coca-Cola Bottling Company of Los Angeles Delaware CCE
Trade names:
Coca-Cola Bottling Company of California
Coca-Cola Bottling Company of Cathedral City
Coca-Cola Bottling Company of Eureka, California
Coca-Cola Bottling Company of Imperial Valley
Coca-Cola Bottling Company of Hawaii
Coca-Cola Bottling Company of Klamath Falls
Coca-Cola Bottling Company of Los Angeles
Coca-Cola Bottling Company of Las Vegas
Coca-Cola Bottling Company of Northern California
Coca-Cola Bottling Company of Oregon
Coca-Cola Bottling Company of Port Angeles
Coca-Cola Bottling Company of San Diego
Coca-Cola Bottling Company of Southern California
Coca-Cola Bottling Company of Spokane
Coca-Cola Bottling Company of Washington
Diamond Head Beverages
Enterprises Media
Medford Coca-Cola Bottling Company
Pacific Coca-Cola Bottling Company
Pacific Coca-Cola Bottling Company of Marysville
Phoenix Coca-Cola Bottling Company
Prescott Coca-Cola Bottling Company
Yuma Coca-Cola Bottling Company
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Owner of
Shares
Jurisdiction (Unless
In Which Otherwise Noted,
Name Organized Ownership is 100%)
- ---------------------------- ---------------- ------------------
<S> <C> <C>
The Laredo Coca-Cola Bottling Company, Inc. Texas CCE
Trade names:
Enterprises Media
McAllen Coca-Cola Bottling Company
Valley Coca-Cola Bottling Company
The Coca-Cola Bottling Company of Memphis, Tenn. Delaware CCE
Trade names:
CCE Bottling Group
CCE-South
Canners of Eastern Arkansas
Coca-Cola Bottling Company of Arkansas
The Coca-Cola Bottling Company of Brownsville
Coca-Cola Bottling Company of Clarksdale
Coca-Cola Bottling Company of Flippin
Coca-Cola Bottling Company of Greenville
Coca-Cola Bottling Company of Little Rock
Coca-Cola Bottling Company of Marianna
Coca-Cola Bottling Company of Mississippi
Coca-Cola Bottling Company of Morrilton
Coca-Cola Bottling Company of Sardis
Coca-Cola Bottling Company of Searcy
Coca-Cola Bottling Company of West Plains
Enterprises Media
Jonesboro Coca-Cola Bottling Company
The Coca-Cola Bottling Company of New York, Inc. Delaware CCE
Trade names:
Coca-Cola Bottling Company of Albany
Coca-Cola Bottling Company of Glens Falls
Coca-Cola Bottling Company of Greenfield
Coca-Cola Bottling Company of New England
Coca-Cola Bottling Company of Oneonta
Coca-Cola Bottling Company of Pittsfield
Coca-Cola Bottling Company of Rutland
Coca-Cola Bottling Company of Syracuse
Coca-Cola Bottling Company of Utica
Coca-Cola Bottling Company of Watertown
Johnston Coca-Cola Bottling Group, Inc. Delaware CCE
Trade names:
The Akron Coca-Cola Bottling Company
Alabama Coca-Cola Bottling Company
Bluegrass Coca-Cola Bottling Company
Burlington Coca-Cola Bottling Company
Central States Coca-Cola Bottling Company
Centralia Coca-Cola Bottling Company
Champaign Coca-Cola Bottling Company
Cincinnati Coca-Cola Bottling Company
Circleville Coca-Cola Bottling Company
Coca-Cola Bottling Company of Bloomington
The Coca-Cola Bottling Company of Cedar Rapids
Coca-Cola Bottling Company of Columbus
Coca-Cola Bottling Company of Eastern Great Lakes
Coca-Cola Bottling Company of Louisville
Coca-Cola Bottling Company of Michigan
The Coca-Cola Bottling Company of Mid-America
Coca-Cola Bottling Company of Minot
</TABLE>
<PAGE> 4
Coca-Cola Bottling Company of Mt. Pleasant
Coca-Cola Bottling Company of Muskegon
The Coca-Cola Bottling Company of Northern Ohio
Coca-Cola Bottling Company of Ohio
Coca-Cola Bottling Company of Ohio/Kentucky
Coca-Cola Bottling Company of Ottumwa
Coca-Cola Bottling Company of Port Huron
Coca-Cola Bottling Company of St. Louis
Coca-Cola Bottling Company of Toledo
Coca-Cola Enterprises - Atlanta Region
Danville Coca-Cola Bottling Company
Dayton Coca-Cola Bottling Company
Decatur Coca-Cola Bottling Company
Dr Pepper Bottling Company of Detroit
DuQuoin Coca-Cola Bottling Company
Elyria Coca-Cola Bottling Company
Enterprises Media
Erie Coca-Cola Bottling Company
Evansville Coca-Cola Bottling Company
Findlay Coca-Cola Bottling Company
Galesburg Coca-Cola Bottling Company
Great Lakes Canning
Hopkinsville Coca-Cola Bottling Company
Jasper Coca-Cola Bottling Company
Johnston Coca-Cola Bottling Company
Lincoln Coca-Cola Bottling Company
Louisville Coca-Cola Bottling Company
Mansfield Coca-Cola Bottling Company
Mid-America Packaging Company
Mid-States Coca-Cola Bottling Company
Midwest Coca-Cola Bottling Company
Newark Coca-Cola Bottling Company
Olney Coca-Cola Bottling Company
Peoria Coca-Cola Bottling Company
Peru Coca-Cola Bottling Company
Portsmouth Coca-Cola Bottling Company
Springfield Coca-Cola Bottling Company
Twinsburg Production
Youngstown Coca-Cola Bottling Company
- --------------------------
(1) This list omits certain subsidiaries which, considered in the aggregate as
a single subsidiary, would not constitute a significant subsidiary.
<PAGE> 1
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 18, 1999,
with respect to the consolidated financial statements and schedule of Coca-Cola
Enterprises Inc. included and/or incorporated by reference in this Annual
Report (Form 10-K) for the year ended December 31, 1998.
* Registration Statement No. 33-18039 on Form S-8, as amended, dated
October 21, 1987 and related Prospectus
* Registration Statement No. 33-18495 on Form S-8, as amended, 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 18,
1991 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
18, 1995 and related Prospectus
* Registration Statement No. 33-58697 on Form S-8, as amended, dated May
18, 1995 and related Prospectus
* Registration Statement No. 33-58699 on Form S-8, as amended, dated May
18, 1995 and related Prospectus
* Registration Statement No. 33-65257 on Form S-8 dated December 21,
1995 and related Prospectus
* Registration Statement No. 33-65261 on Form S-8 dated December 21,
1995 and related Prospectus
* Registration Statement No. 33-65413 on Form S-8 dated December 27,
1995 and related Prospectus
* Registration Statement No. 333-18569 on Form S-3 dated December 23,
1996 and related Prospectus
* Registration Statement No. 333-26181 on Form S-8 dated April 29, 1997
and related Prospectus
* Registration Statement No. 333-26173 on Form S-8 dated April 29, 1997
and related Prospectus
* Registration Statement No. 333-47353 on Form S-8 dated March 3, 1998
and related Prospectus
* Registration Statement No. 333-51559 on Form S-8, as
<PAGE> 2
amended, dated April 30, 1998 and related Prospectus
* Registration Statement No. 333-51575 on Form S-8 dated April 30, 1998
and related Prospectus
* Registration Statement No. 333-51573 on Form S-8 dated April 30, 1998
and related Prospectus
* Registration Statement No. 333-61891 on Form S-3 dated August 18, 1998
and related Prospectus
* Registration Statement No. 333-63413 on Form S-8 dated September 14,
1998 and related Prospectus
* Registration Statement No. 333-68681 on Form S-3 dated December 9, 1998
and related Prospectus
* Registration Statement No. 333-72713 on Form S-3 dated February 19,
1999 and related Prospectus
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
March 18, 1999
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, SUMMERFIELD K. JOHNSTON, JR.,
Chairman of the Board of Directors of Coca-Cola Enterprises Inc. (the
"Company"), do hereby appoint John R. Alm, Executive Vice President and Chief
Financial Officer of the Company, Lowry F. Kline, Executive Vice President and
General Counsel of the Company, and J. Guy Beatty, Jr., Secretary of the
Company, or any one of them, my true and lawful attorney for me and in my name
in any and all capacities for the purpose of executing on my behalf the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, or
any amendment or supplement thereto, and causing such Annual Report or any such
amendment or supplement to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ SUMMERFIELD K. JOHNSTON, JR.
---------------------------------------
Chairman of the Board of Directors,
Coca-Cola Enterprises Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, JOSEPH R. GLADDEN, JR., Vice
Chairman of the Board of Directors of Coca-Cola Enterprises Inc. (the
"Company"), do hereby appoint John R. Alm, Executive Vice President and Chief
Financial Officer of the Company, Lowry F. Kline, Executive Vice President and
General Counsel of the Company, and J. Guy Beatty, Jr., Secretary of the
Company, or any one of them, my true and lawful attorney for me and in my name
in any and all capacities for the purpose of executing on my behalf the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, or
any amendment or supplement thereto, and causing such Annual Report or any such
amendment or supplement to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ JOSEPH R. GLADDEN, JR.
--------------------------------------------
Vice Chairman of the Board of Directors,
Coca-Cola Enterprises Inc.
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, HOWARD G. BUFFETT, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ HOWARD G. BUFFETT
---------------------------------------
Director, Coca-Cola Enterprises Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, JOHN L. CLENDENIN, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ JOHN L. CLENDENIN
---------------------------------------
Director, Coca-Cola Enterprises Inc.
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, JAMES E. CHESTNUT, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ JAMES E. CHESTNUT
---------------------------------------
Director, Coca-Cola Enterprises Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, JOHNNETTA B. COLE, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ JOHNNETTA B. COLE
---------------------------------------
Director, Coca-Cola Enterprises Inc.
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, J. TREVOR EYTON, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ J. TREVOR EYTON
---------------------------------------
Director, Coca-Cola Enterprises Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, CLAUS M. HALLE, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ CLAUS M. HALLE
---------------------------------------
Director, Coca-Cola Enterprises Inc.
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, L. PHILLIP HUMANN, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ L. PHILLIP HUMANN
---------------------------------------
Director, Coca-Cola Enterprises Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, JOHN E. JACOB, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ JOHN E. JACOB
---------------------------------------
Director, Coca-Cola Enterprises Inc.
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, ROBERT A. KELLER, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ ROBERT A. KELLER
---------------------------------------
Director, Coca-Cola Enterprises Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, JEAN-CLAUDE KILLY, a Director of
Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ JEAN-CLAUDE KILLY
---------------------------------------
Director, Coca-Cola Enterprises Inc.
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, SCOTT L. PROBASCO, JR., a Director
of Coca-Cola Enterprises Inc. (the "Company"), do hereby appoint John R. Alm,
Executive Vice President and Chief Financial Officer of the Company, Lowry F.
Kline, Executive Vice President and General Counsel of the Company, and J. Guy
Beatty, Jr., Secretary of the Company, or any one of them, my true and lawful
attorney for me and in my name in any and all capacities for the purpose of
executing on my behalf the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, or any amendment or supplement thereto, and causing
such Annual Report or any such amendment or supplement to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of March,
1999.
/S/ SCOTT L. PROBASCO, JR.
---------------------------------------
Director, Coca-Cola Enterprises Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE AUDITED FINANCIAL STATEMENTS OF THE FILER FOR THE YEAR ENDED
DECEMBER 31, 1998 INCLUDED IN ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 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> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 68
<SECURITIES> 0
<RECEIVABLES> 1,394
<ALLOWANCES> 57
<INVENTORY> 543
<CURRENT-ASSETS> 2,285
<PP&E> 7,847
<DEPRECIATION> 2,956
<TOTAL-ASSETS> 21,132
<CURRENT-LIABILITIES> 3,397
<BONDS> 9,605
0
49
<COMMON> 446
<OTHER-SE> 1,943
<TOTAL-LIABILITY-AND-EQUITY> 21,132
<SALES> 13,414
<TOTAL-REVENUES> 13,414
<CGS> 8,391
<TOTAL-COSTS> 8,391
<OTHER-EXPENSES> (1)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 701
<INCOME-PRETAX> 169
<INCOME-TAX> 27
<INCOME-CONTINUING> 142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.35
</TABLE>
