<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended July 2, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-09300
COCA-COLA ENTERPRISES INC.
(Exact name of registrant as specified in its charter)
Delaware 58-0503352
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 Windy Ridge Parkway, Suite 700
Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
770-989-3000
(Registrant's telephone number, including area code)
___________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock.
424,968,488 Shares of $1 Par Value Common Stock as of August 6, 1999
<PAGE> 2
COCA-COLA ENTERPRISES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED JULY 2, 1999
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the
Quarters ended July 2, 1999 and July 3, 1998 ............ 1
Condensed Consolidated Statements of Operations for the
Six Months ended July 2, 1999 and July 3, 1998 .......... 2
Condensed Consolidated Balance Sheets as of July 2, 1999
and December 31, 1998 ................................... 3
Condensed Consolidated Statements of Cash Flows for the
Six Months ended July 2, 1999 and July 3, 1998 .......... 5
Notes to Condensed Consolidated Financial Statements ...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................... 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 22
Signatures ........................................................ 23
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions except per share data)
QUARTER ENDED
---------------------
JULY 2, JULY 3,
1999 1998
-------- --------
NET OPERATING REVENUES ................................ $3,797 $3,687
Cost of sales ......................................... 2,433 2,297
------ ------
GROSS PROFIT .......................................... 1,364 1,390
Selling, delivery, and administrative expenses ........ 1,127 1,048
------ ------
OPERATING INCOME ...................................... 237 342
Interest expense, net ................................. 186 170
Other nonoperating expenses, net ...................... 1 --
------ ------
INCOME BEFORE INCOME TAXES ............................ 50 172
Income tax expense .................................... 16 61
------ ------
NET INCOME ............................................ 34 111
Preferred stock dividends ............................. 1 --
------ ------
NET INCOME APPLICABLE TO COMMON SHARE OWNERS .......... $ 33 $ 111
====== ======
BASIC NET INCOME PER SHARE APPLICABLE TO COMMON
SHARE OWNERS ........................................ $ 0.08 $ 0.28
====== ======
DILUTED NET INCOME PER SHARE APPLICABLE TO COMMON
SHARE OWNERS ........................................ $ 0.08 $ 0.27
====== ======
DIVIDENDS PER SHARE APPLICABLE TO COMMON SHARE $ 0.04 $ 0.04
OWNER ............................................... ====== ======
See Notes to Condensed Consolidated Financial Statements.
- 1 -
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions except per share data)
SIX MONTHS ENDED
---------------------
JULY 2, JULY 3,
1999 1998
-------- --------
NET OPERATING REVENUES ................................ $7,066 $6,645
Cost of sales ......................................... 4,476 4,173
------ ------
GROSS PROFIT .......................................... 2,590 2,472
Selling, delivery, and administrative
expenses ............................................ 2,258 2,041
------ ------
OPERATING INCOME ...................................... 332 431
Interest expense, net ................................. 373 338
------ ------
INCOME (LOSS) BEFORE INCOME TAXES ..................... (41) 93
Income tax expense (benefit) .......................... (14) 33
------ ------
NET INCOME (LOSS) ..................................... (27) 60
Preferred stock dividends ............................. 2 --
------ ------
NET INCOME (LOSS) APPLICABLE TO COMMON
SHARE OWNERS ........................................ $ (29) $ 60
====== ======
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
APPLICABLE TO COMMON SHARE OWNERS ................... $(0.07) $ 0.15
====== ======
DIVIDENDS PER SHARE APPLICABLE TO COMMON SHARE
OWNERS .............................................. $ 0.08 $0.065
====== ======
See Notes to Condensed Consolidated Financial Statements.
- 2 -
<PAGE> 5
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
JULY 2, DECEMBER 31,
ASSETS 1999 1998
----------- ------------
(Unaudited)
CURRENT
Cash and cash investments, at cost
approximating market ......................... $ 142 $ 68
Trade accounts receivable, less
reserves of $59 and $57 million,
respectively ................................. 1,495 1,337
Inventories:
Finished goods ............................... 441 373
Raw materials and supplies ................... 266 170
------- -------
707 543
Prepaid expenses and other current
assets ....................................... 391 337
------- -------
Total Current Assets ....................... 2,735 2,285
PROPERTY, PLANT, AND EQUIPMENT
Land ........................................... 355 349
Buildings and improvements ..................... 1,263 1,237
Machinery and equipment ........................ 6,570 6,068
------- -------
8,188 7,654
Less allowances for depreciation ............... 3,226 2,956
------- -------
4,962 4,698
Construction in progress ....................... 239 193
------- -------
Net Property, Plant, and
Equipment .................................. 5,201 4,891
FRANCHISES AND OTHER NONCURRENT ASSETS, NET ...... 14,608 13,956
------- -------
$22,544 $21,132
======= =======
See Notes to Condensed Consolidated Financial Statements.
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions except share data)
JULY 2, DECEMBER 31,
LIABILITIES AND SHARE-OWNERS' EQUITY 1999 1998
----------- ------------
(Unaudited)
CURRENT
Accounts payable and accrued
expenses ..................................... $ 2,330 $ 2,257
Current portion of long-term debt 1,776 1,140
------- -------
Total Current Liabilities .................. 4,106 3,397
LONG-TERM DEBT, LESS CURRENT MATURITIES .......... 9,480 9,605
RETIREMENT AND INSURANCE PROGRAMS
AND OTHER LONG-TERM OBLIGATIONS ................ 1,025 977
LONG-TERM DEFERRED INCOME TAX LIABILITIES ........ 4,987 4,715
SHARE-OWNERS' EQUITY
Preferred stock ................................ 49 49
Common stock, $1 par value -
Authorized - 1,000,000,000 shares;
Issued - 447,937,161 and
446,319,946 shares, respectively ........... 448 446
Additional paid-in capital ..................... 2,649 2,190
Reinvested earnings ............................ 395 458
Accumulated other comprehensive income (loss) .. (61) (2)
Common stock in treasury, at cost
(23,069,205 and 44,865,214
shares, respectively) ........................ (534) (703)
------- -------
Total Share-Owners' Equity ................. 2,946 2,438
------- -------
$22,544 $21,132
======= =======
- 4 -
<PAGE> 7
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
SIX MONTHS ENDED
---------------------
JULY 2, JULY 3,
1999 1998
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .................................. $ (27) $ 60
Adjustments to reconcile net income
(loss) to net cash derived from
operating activities:
Depreciation ................................... 437 342
Amortization ................................... 222 182
Deferred income tax benefit .................... (47) (21)
Net changes in current assets and
current liabilities .......................... (356) (364)
Other .......................................... 55 36
------- -------
Net cash derived from operating activities ......... 284 235
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in capital assets ...................... (601) (838)
Fixed asset disposals .............................. 2 3
Cash investments in bottling operations,
net of cash acquired ............................. (10) (208)
Other investing activities ......................... (45) (68)
------- -------
Net cash used in investing activities .............. (654) (1,111)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in commercial paper ................... 507 648
Issuance of long-term debt ......................... 703 2,048
Payments on long-term debt ......................... (877) (1,806)
Stock purchases for treasury ....................... (1) (51)
Cash dividend payments on common and
preferred stock .................................. (36) (26)
Exercise of employee stock options ................. 27 14
Cash received on currency hedges ................... 121 31
------- -------
Net cash derived from financing activities ......... 444 858
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
INVESTMENTS ........................................ 74 (18)
Cash and cash investments at beginning
of period ........................................ 68 45
------- -------
CASH AND CASH INVESTMENTS AT END OF PERIOD ........... $ 142 $ 27
======= =======
SUPPLEMENTAL NONCASH INVESTING AND FINANCING
ACTIVITIES:
Investments in bottling operations:
Fair value of assets acquired .................... $ 1,146 $ 2,126
Debt issued and assumed .......................... (114) (497)
Other liabilities assumed ........................ (425) (800)
Equity issued .................................... (597) (621)
------- -------
Cash paid, net of cash acquired .................. $ 10 $ 208
======= =======
See Notes to Condensed Consolidated Financial Statements.
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COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles (GAAP) for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all information and
footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments consisting of normal recurring accruals considered
necessary for a fair presentation have been included. Certain amounts in the
Condensed Consolidated Statements of Cash Flows have been reclassified to
conform to 1999 classifications. For further information, refer to the
consolidated financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
NOTE B - SEASONALITY OF BUSINESS
Operating results for the second quarter and six months ended July 2, 1999 are
not indicative of results that may be expected for the year ending December 31,
1999 because of business seasonality and the nonrecurring recall costs discussed
in Note C. Business seasonality results from a combination of higher unit sales
of the Company's products in the second and third quarters versus the first and
fourth quarters of the year and the methods of accounting for fixed costs such
as depreciation, amortization, and interest expense which are not significantly
impacted by business seasonality. In addition, the first half of 1999 includes
one fewer selling day than the first half of 1998, influencing period
comparisons.
NOTE C - NONRECURRING COSTS
In June 1999 the Company recalled product in certain parts of Europe.
Approximately 17 million unit cases of product were impacted by the product
recall, less than one percent of the Company's total annual volume. Recall costs
of approximately $103 million consist primarily of recalled product costs,
destruction costs, third party costs, warehousing costs, and pick-up/delivery
costs. The amount does not include any financial impact related to lost sales or
the potential impact on future sales although the Company's operating results
are impacted by these items. The Company is investigating potential
reimbursement by insurance and/or third parties; however, second-quarter 1999
results do not include any potential reimbursement. Details of the nonrecurring
costs are as follows (in millions):
- 6 -
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COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - NONRECURRING COSTS (CONTINUED)
ACCRUAL
NONRECURRING BALANCE AT
COSTS JULY 2,1999
------------ ------------
COST OF SALES
Costs of recalled product (including taxes and
third party handling) ........................ $ 59 $ 12
Destruction, transportation, and warehousing
costs ........................................ 32 32
---- ----
TOTAL COST OF SALES ............................ 91 44
SELLING, DELIVERY, AND ADMINISTRATIVE
Other selling costs ............................ 7 7
Other legal, delivery, and administrative costs. 5 4
---- ----
TOTAL SELLING, DELIVERY, AND ADMINISTRATIVE .... 12 11
---- ----
TOTAL .......................................... $103 $ 55
==== ====
NOTE D - ACQUISITIONS
In the first six months of 1999 the Company completed the following seven
acquisitions in the United States for an aggregate purchase price of
approximately $630 million:
- Cameron Coca-Cola Bottling Company, Inc., 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,
- Montgomery Coca-Cola Bottling Company, Inc., operating in Alabama, and
- Perryton Coca-Cola Bottling Company, Inc., operating in the panhandles of
Texas and Oklahoma.
- 7 -
<PAGE> 10
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE D - ACQUISITIONS (CONTINUED)
These acquisitions were funded through a combination of cash, assumed debt, and
shares of the Company's common stock from treasury. The purchase method of
accounting has been used, and accordingly, the results of operations of the
acquired companies are included in the Company's Condensed Consolidated
Statements of Operations beginning on or near the dates of acquisition. In
addition, the assets and liabilities of companies acquired are included in the
Company's Condensed Consolidated Balance Sheet at their estimated fair values on
the dates of acquisition.
On July 30, 1999, the Company also completed the acquisitions of Sud Boissons
S.A. and Societe Boissons Gazeuses de la Cote d'Azur, both of which operate in
southern France, for approximately $100 million in cash and assumed debt.
NOTE E - LONG-TERM DEBT
Long-term debt balances, including current maturities, are adjusted for the
effects of interest rate and currency swap agreements (in millions):
JULY 2, DECEMBER 31,
1999 1998
------------ ------------
U.S. commercial paper (weighted
average rates of 4.1% and 4.5%)(A) .......... $ 2,028 $ 1,572
Canadian dollar commercial paper
(weighted average rates of 4.9%
and 5.1%) ................................... 766 626
Canadian dollar notes payable
(weighted average rate of 5.7%)(B) .......... 342 --
Notes due 1999 - 2037 (weighted
average rate of 6.8%) ....................... 2,150 2,150
Debentures due 2012 - 2098 (weighted
average rate of 7.4%) ....................... 3,800 3,800
8.35% zero coupon notes due 2020
(net of unamortized discount of
$1,584 and $1,598, respectively) ............ 348 334
Euro notes due 2002 - 2011 (weighted
average rate of 7.2%) ....................... 1,170 1,199
Various foreign currency debt ................. 419 869
Additional debt ............................... 233 178
------- -------
Long-term debt including effect
of net asset positions of currency
swaps ..................................... 11,256 10,728
Net asset positions of currency swap
agreements(C) ............................. -- 17
------- -------
$11,256 $10,745
======= =======
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<PAGE> 11
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE E - LONG-TERM DEBT (CONTINUED)
Aggregate maturities of long-term debt for the five twelve-month periods
subsequent to July 2, 1999 are as follows (in millions): 2000 - $1,776; 2001 -
$284; 2002 - $2,307; 2003 - $771; and 2004 - $550.
(A) At July 2, 1999 and December 31, 1998, $1,375 million and $1,352 million of
the Company's U.S. commercial paper 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) During the first six months of 1999 the Company issued $234 million of 5.65%
Notes due 2004 and $100 million of 5.85% Notes due 2009 under a Canadian
Medium Term Note Program.
(C) 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 July 2, 1999 and
December 31, 1998, the Company had $275 million and $687 million, respectively,
of short-term borrowings outstanding under these credit facilities. At July 2,
1999 and December 31, 1998, the Company has approximately $4.1 billion and $3.8
billion, respectively, of amounts available under domestic and international
credit facilities.
At July 2, 1999 and December 31, 1998, approximately $2.3 billion and $2.4
billion, respectively, 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 July 2, 1999 and December 31, 1998, the Company had available for issuance
approximately $3.0 billion in registered debt securities under a registration
statement with the Securities and Exchange Commission. At July 2, 1999 and
December 31, 1998, the Company had available for issuance approximately $1.8
billion and $1.3 billion, respectively, in debt securities under a Euro Medium
Term Note Program and approximately $1.0 billion at July 2, 1999 available for
issuance under a Canadian Medium Term Note Program.
The credit facilities and outstanding notes and debentures contain various
provisions which, among other things, require the Company to maintain a defined
leverage ratio and limit the incurrence of certain liens or encumbrances in
excess of defined amounts. These requirements currently are not, and it is not
anticipated they will become, restrictive on the Company's liquidity or capital
resources.
-9-
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COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE F - INCOME TAXES
The Company's effective tax rates for the first six months of 1999 and 1998 were
33% and 36%, respectively. A reconciliation of the income tax provision at the
statutory federal rate to the Company's actual income tax provision follows (in
millions):
SIX MONTHS ENDED
---------------------
JULY 2, JULY 3,
1999 1998
-------- --------
U.S. federal statutory expense ...................... $ 22 $ 32
State benefit, net of federal expense ............... (1) --
Taxation of European and Canadian operations, net.... (42) (7)
Valuation allowance provision ....................... 4 4
Nondeductible items ................................. 3 3
Other, net .......................................... -- 1
---- ----
$(14) $ 33
==== ====
NOTE G - STOCK-BASED COMPENSATION PLANS
The Company granted approximately 6.3 million service-vested stock options to
certain executive and management level employees and non-employee officers and
members of the Board of Directors during the first six months of 1999. These
options vest over a period of up to nine years and expire ten years from the
date of grant. Certain option grants contain provisions that allow for
accelerated vesting if various stock performance criteria are met. Of the total
options granted, 3.3 million were granted at an exercise price equal to the fair
market value of the stock on the grant date, and 3.0 million were premium-priced
options.
An aggregate 1.6 million shares of common stock were issued during the first six
months of 1999 from the exercise of stock options.
NOTE H - PREFERRED STOCK
In connection with the June 1998 acquisition of The Coca-Cola Bottling Company
of Bellingham and the August 1998 acquisition of Great Plains Bottlers and
Canners, Inc., the Company issued 96,900 of 120,000 shares of $1 par value
voting convertible preferred stock authorized ("Bellingham series") and issued
392,464 of 450,000 shares of $1 par value voting convertible preferred stock
authorized ("Great Plains series"). The Bellingham series pays quarterly
dividends equaling 4% annually and the Great Plains series pays quarterly
dividends equaling 8% annually. Both series have stated values of $100 per share
and the holders have the option to convert each share into a number of shares of
the Company's common stock based on the stated value divided by a defined
conversion date price, which approximates the average closing sales price per
share at date of conversion. The Bellingham series must be converted no later
than June 30, 2001 and the Great Plains series must be converted no later than
August 7, 2003. As of July 2, 1999, no shares of either series had been
converted.
- 10 -
<PAGE> 13
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE I - COMPREHENSIVE INCOME (LOSS)
The following table (in millions) presents a reconciliation of comprehensive
income (loss), comprised of net income and other adjustments to comprehensive
income. Other adjustments to comprehensive income may 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.
QUARTER ENDED SIX MONTHS ENDED
------------------ ------------------
JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998
-------- -------- -------- --------
Net income (loss) .................... $ 34 $111 $(27) $ 60
Currency items, including tax effects
of hedges .......................... (32) 9 (59) (11)
---- ---- ---- ----
Comprehensive income (loss) .......... $ 2 $120 $(86) $ 49
==== ==== ==== ====
NOTE J - EARNINGS PER SHARE
The following table presents information concerning basic and diluted earnings
per share (in millions except per share data; per share data is calculated prior
to rounding to millions).
QUARTER ENDED SIX MONTHS ENDED
------------------ ------------------
JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998
-------- -------- -------- --------
Net income (loss) ..................... $ 34 $ 111 $ (27) $ 60
Preferred stock dividends ............. 1 -- 2 --
------ ------ ------ ------
Basic and diluted net income (loss)
applicable to common share owners.... $ 33 $ 111 $ (29) $ 60
====== ====== ====== ======
Basic average common shares
outstanding ......................... 426 394 424 390
Effect of dilutive securities:
Stock compensation awards ........... 11 13 -- 14
------ ------ ------ ------
Diluted average common shares
outstanding ......................... 437 407 424 404
====== ====== ====== ======
Basic net income (loss) per share
applicable to common share owners.... $ 0.08 $ 0.28 $(0.07) $ 0.15
====== ====== ====== ======
Diluted net income (loss) per share
applicable to common share owners.... $ 0.08 $ 0.27 $(0.07) $ 0.15
====== ====== ====== ======
- 11 -
<PAGE> 14
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE K - GEOGRAPHIC OPERATING INFORMATION
The Company operates in one industry: the marketing, distribution, and
production of bottle and can liquid nonalcoholic refreshments. On July 2, 1999,
the Company operated 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 net operating revenues for the six months ended July 2,
1999 and July 3, 1998 and long-lived assets as of July 2, 1999 and December 31,
1998 by geographic territory (in millions):
1999 1998
---------------------- ----------------------
NET (A) LONG- NET (A) LONG-
OPERATING LIVED OPERATING LIVED
REVENUES ASSETS REVENUES ASSETS
--------- --------- --------- ---------
North American .............. $ 5,299 $15,298 $ 4,937 $14,121
European .................... 1,767 4,511 1,708 4,726
------- ------- ------- -------
Consolidated ................ $ 7,066 $19,809 $ 6,645 $18,847
======= ======= ======= =======
(A) Because of acquisitions, business seasonality, and sales prohibitions
resulting from the product recall, reported results may not be indicative
of full-year results for periods presented.
The Company has no material amounts of sales or transfers between its North
American and European operations and no significant United States export sales.
NOTE L - COMMITMENTS AND CONTINGENCIES
In North America, the Company purchases PET (plastic) bottles from manufacturing
cooperatives. The Company has guaranteed payment of up to $254 million of
indebtedness owed by these manufacturing cooperatives to third parties. At July
2, 1999, these cooperatives had approximately $133 million of indebtedness
guaranteed by the Company. The Company has letters of credit outstanding
aggregating approximately $129 million under self-insurance programs.
The Company's bottler in Canada, which was acquired in 1997, is being audited
for the years 1990 through 1996 by Canadian taxing authorities. Although it is
early in the examination, the authorities have raised issues that could result
in an assessment of additional taxes. The bottler believes it has substantial
defenses to the issues being raised, however, it is too early to accurately
predict the amount of any ultimate assessment or the final outcome of this
matter. If an assessment were made, the authorities by law may require as much
as one-half of any amount assessed to become immediately due and payable while
the bottler pursues an appeal.
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 discussions with
counsel, that any ultimate liability would not materially affect the Company's
financial position, results of operations, or liquidity.
- 12 -
<PAGE> 15
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
BUSINESS SUMMARY
Coca-Cola Enterprises Inc. ("the Company") is the world's largest marketer,
distributor, and producer of products of The Coca-Cola Company. The Company also
distributes other beverage brands in select markets. The Company sells bottled
and canned liquid nonalcoholic refreshments in the United States and Canada
through franchise territories in 46 states of the United States, the District of
Columbia, and in the 10 provinces of Canada. We also operate in portions of
Europe, including Belgium, France, Great Britain, Luxembourg, and the
Netherlands.
Management's discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the accompanying footnotes along
with the cautionary statements at the end of this section.
RESULTS OF OPERATIONS
OVERVIEW
Consolidated cash operating profit, or net income before deducting interest,
taxes, depreciation, amortization, and other nonoperating expenses, was $574
million in the second quarter of 1999, below second-quarter 1998 results
entirely due to the nonrecurring costs and lost sales associated with the
product recall in certain parts of Europe. Excluding the product recall costs of
$103 million, second-quarter 1999 cash operating profit grew 6% over acquisition
adjusted second-quarter 1998 results. The comparable second-quarter results
reflect the combination of higher prices and improved operating leverage in our
North American territories offsetting a decline in volume in both North America
and Europe.
NONRECURRING PRODUCT RECALL COSTS
In June 1999 the Company withdrew certain products in its European territories
because of quality concerns. The sources of the problems were sulfur compounds
in some products manufactured in one of our Belgian production facilities and
odors on cans. Since addressing these quality issues and reintroducing
the products, the Company has not experienced any recurrence of these
quality issues. The products and other related materials recalled are being
destroyed in an environmentally responsible way. The quantities of product
being destroyed are significant and exceed available capacity in the market.
Under the current destruction methods, the completion of this task will likely
extend into the year 2000.
The Company incurred approximately $103 million of nonrecurring costs in
connection with the recall, approximately $91 million was expensed in cost of
sales with the remaining amount in selling, delivery, and administrative
expenses, as detailed in Note C to the condensed consolidated financial
statements. These one-time costs consist primarily of the cost of product
recalled, fees associated with the destruction of affected packages, costs to
warehouse the product prior to destruction, third party costs, and expenses
associated with pick-up and redelivery. The Company is investigating potential
reimbursement by insurance and/or third parties; however, second-quarter 1999
results do not include any potential reimbursement.
- 13 -
<PAGE> 16
Additionally, these costs do not include any financial impact related to lost
sales or the recall's potential impact on future sales.
STRATEGIC INITIATIVES
In line with our objective to deliver a superior investment return to our share
owners, we manage the volume, net revenues, and cost aspects of our business to
maximize profitability while effectively integrating newly acquired territories
to ensure consistent long-term growth. During the first half of 1999 the Company
implemented various pricing initiatives and continued to leverage the
infrastructure investments made over the last several years. Additionally, we
have continued the integration and expansion of our operations. In the first
quarter of 1999, we acquired seven North American Coca-Cola bottling operations.
On July 30, 1999, we completed our acquisition of two bottling operations in
the south of France.
COMPARABLE RESULTS
Management believes comparable results are better indicators of current
operating trends. Comparable operating results are determined by adjusting
reported 1998 performance to include results of significant 1998 and 1999
bottling territory acquisitions for the same periods as reported in 1999 and to
exclude the nonrecurring product recall costs from the 1999 reported results.
Comparable results have not been adjusted for the impact of sales lost during
the period we were prohibited from selling products in Europe during the second
quarter of 1999. In addition to comparison adjustments for acquisitions, volume
information for the first half of 1998 has been adjusted for one fewer selling
day in 1999.
CASH OPERATING PROFIT (COP)
In the opinion of management, COP is one of the key standards for measuring our
operating performance. COP is used by management as a primary 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.
In the first six months of 1999, COP was $991 million, up 4% from reported
six-month 1998 results. The first six months of 1999 had one fewer selling day
than the first six months of 1998. The reported COP growth rate is affected by
nonrecurring product recall costs and the significant number of acquisitions
completed in 1998 and 1999. Excluding the nonrecurring product recall costs,
six-month 1999 COP exceeded comparable six-month 1998 results by 8%. It is too
early for us to predict the impact of lost sales from the recall initiative on
full-year results. Accordingly, we are unable to re-affirm our intentions for
full-year 1999 comparable cash operating profit growth of 12% at this time,
however, we anticipate that the situation will not materially affect financial
results in the year 2000 and beyond.
- 14 -
<PAGE> 17
VOLUME
Volume results were impacted by our strategic initiative directed toward
increased prices and the prohibition from sales during the product recall.
- -------------------------------------------------------------------------------
SECOND-QUARTER 1999 SIX-MONTHS 1999
-------------------- --------------------
REPORTED COMPARABLE REPORTED COMPARABLE
CHANGE CHANGE CHANGE CHANGE
- -------------------------------------------------------------------------------
Physical Case Bottle and Can
Volume:
Consolidated ................. (1)% (6)% 2% (3)%
North American Territories ... 1% (5)% 4% (3)%
European Territories ......... (7)% (7)% (5)% (3)%
- -------------------------------------------------------------------------------
In the first half and second quarter of 1999, North America represented 78% of
total physical case volume and Europe contributed the remaining 22%. The
second-quarter 1999 North American volume performance reflects the impact of the
Company's efforts to increase prices in the take home segments of our business
and is impacted by the 9% volume growth experienced in the second quarter of
1998.
The second-quarter 1999 European volume performance primarily reflects the
impact of the product recall in our European operations. Volume in Great
Britain, where no product was recalled, increased 6% in the second quarter of
1999, including a 9% increase in the month of June when the recall occurred in
other parts of our European territories. Our territory most affected by the
product recall, the Benelux region encompassing Belgium, Luxembourg, and the
Netherlands, experienced a decline of 29% in the second quarter of 1999 and a
decrease of almost 70% in the month of June.
NET OPERATING REVENUES AND COST OF SALES
The Company's second-quarter 1999 net operating revenues increased 3% to almost
$3.8 billion, reflecting the impact of the Company's 1998 and 1999 acquisitions
and 1999 price increases offset by the Company's volume declines. Six-month 1999
operating revenues increased 6% to $7.1 billion. Our operations in North America
represented 76% and 75% of second-quarter and six-month 1999 net operating
revenues, respectively, with Europe generating the remaining percentages.
Comparable net revenues per physical case to retailers (bottle and can) grew
4.5% for second-quarter 1999 and 4% for the first six months of 1999. Net
revenues per case to retailers growth in the second quarter of 1999 reflected
our achieved higher pricing and favorable product, package, and channel mix
shifts.
Reported cost of sales per physical case (bottle and can) increased 5% for
second-quarter 1999 and 4% for the first six months of 1999. Cost of sales per
case as reported is significantly impacted by the nonrecurring product recall
costs. Comparable cost of sales per physical case, which eliminates the impact
of the nonrecurring product recall costs, decreased 0.5% for second-quarter 1999
and increased 0.5% for the first six months of 1999.
- 15 -
<PAGE> 18
PER SHARE DATA
In the second quarter of 1999, net income applicable to common share owners was
$33 million, or $0.08 per common share. Excluding the nonrecurring product
recall costs of $103 million pretax, or $0.16 per share after tax, net income
per diluted share was $0.24 as compared to reported second-quarter 1998 diluted
net income of $0.27 per common share. In the first six months of 1999, the net
loss applicable to common share owners was $29 million or a loss of $0.07 per
common share. Excluding the nonrecurring product recall costs, net income per
diluted share was $0.09 compared to reported 1998 diluted net income of $0.15
per common share.
In addition to the nonrecurring product recall costs and the associated lost
sales, the change in net income per share is effected by the incremental fixed
costs such as depreciation, amortization, and interest expense related to our
increased capital expenditures, our 1998 share repurchase program and the 1998
and 1999 acquisitions. Additionally, the Company issued approximately 22 million
shares of common stock in connection with its 1999 acquisitions.
SELLING, DELIVERY, AND ADMINISTRATIVE EXPENSES
In second-quarter 1999, consolidated selling, delivery, and administrative
expenses as a percent of net operating revenues increased to 30% from
second-quarter 1998 results of 28%. Year-to-date 1999 consolidated selling,
delivery, and administrative expenses as a percent of net operating revenues
increased to 32% from 31% for the first half of 1998. These increases are
primarily the result of the nonrecurring product recall costs combined with
depreciation and amortization expenses related to our increased capital spending
and investments in bottling operations.
INTEREST EXPENSE
Second-quarter and year-to-date 1999 net interest expense increased from
reported 1998 levels due to higher average debt balances from the Company's 1998
acquisitions, capital spending and share repurchase programs. The weighted
average interest rate for the second quarter and first half of 1999 was 6.6%,
compared to 6.9% and 7.0% in the second quarter and first six months of 1998,
respectively.
INCOME TAX
The Company's effective tax rates for the first six months of 1999 and 1998 were
33% and 36%, respectively. The effective tax rate for full-year 1998 was 33%.
The Company's second-quarter 1999 effective tax rate reflects the expected
full-year 1999 pretax earnings combined with the beneficial tax impact of
certain international operations.
CASH FLOW AND LIQUIDITY REVIEW
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.
- 16 -
<PAGE> 19
For long-term financing needs, we have available approximately $3.0 billion in
registered debt securities for issuance under a registration statement with the
Securities and Exchange Commission, $1.8 billion in debt securities under a
European Medium Term Note Program, and an additional $1.0 billion in debt
securities under a Canadian 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 program and
other credit facilities. At July 2, 1999, we had approximately $275 million
outstanding under credit facilities, with an additional $4.1 billion available
for future borrowings. We intend to continue refinancing borrowings under our
commercial paper program and our short-term credit facilities with longer-term
fixed and floating rate financings.
SUMMARY OF CASH ACTIVITIES
Cash and cash investments increased $74 million during the first half of 1999
from net cash transactions. Our primary sources of cash during the first six
months of 1999 were proceeds from the issuance of debt and the increase in
commercial paper aggregating $1.2 billion, and proceeds from our operations of
approximately $284 million. Our primary uses of cash were for capital
expenditures totaling $601 million, and long-term debt payments totaling $877
million.
Operating Activities: Operating activities resulted in $284 million of net cash
provided during the first half of 1999 compared to $235 million provided by
operations in the first six months of 1998. The higher depreciation and
amortization expense in 1999 results from the effects of increased capital
spending and the effects of the 1998 and 1999 acquisitions.
Investing Activities: Net cash used in investing activities resulted from the
Company's continued capital investments in its infrastructure and the
acquisitions of bottling operations. The Company expects to spend between $1.6
billion and $1.7 billion in 1999 on capital expenditures.
Financing Activities: The Company borrowed a net $507 million under its
commercial paper program to satisfy seasonal working capital needs and other
short-term financing requirements. The Company continues to refinance portions
of its short-term borrowings with longer-term fixed and floating rate debt. In
the first half of 1999, the Company issued $703 million in notes and debentures.
Cash received on currency hedges results from settlements of currency swap
agreements, including hedges on net investments in international subsidiaries.
FINANCIAL CONDITION
The increase in property, plant, and equipment results from capital expenditures
of approximately $600 million in the first half of 1999 and the 1999
acquisitions. The increase in long-term debt is primarily a result of the
financing of our capital expenditures, funding of the share repurchase program,
and our 1999 acquisitions.
In the first half of 1999 activities in currency markets resulted in a $59
million reduction to the Company's comprehensive income. As currency exchange
rates fluctuate, translation of the statements of operations for our
international businesses into U.S. dollars will affect the comparability of
revenues and expenses between periods.
- 17 -
<PAGE> 20
KNOWN 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. We believe necessary modifications and replacements of our
critical information technology (IT) and non-IT systems will be completed in a
timely manner. 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 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. Projects are in
various stages of completion. We estimate that approximately 90% of all
Year 2000 identified issues have been corrected.
We have an ongoing information systems development plan to standardize and
upgrade systems throughout the Company, including recently acquired companies.
Our development and standardization plans have resulted in many systems that
will function in 2000 with minimal modifications or adjustments.
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. We have developed data bases to track
information relative to customer and supplier readiness. This information will
be utilized to develop transition inventory plans and to facilitate contingency
planning across the Company. 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 materials/packaging
suppliers could impact the availability and expected costs of raw materials.
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 ensure that we continue to meet our
customers' needs in the most efficient manner and that critical operations
continue to operate effectively. In early April 1999 we conducted Business
Continuity Planning workshops with the Company's business area representatives
resulting in the preliminary development of critical process continuity plans.
We expect these plans to be finalized by the end of August 1999 and implemented,
throughout all of the Company's operations, by the end of October 1999.
- 18 -
<PAGE> 21
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 ...... Completed 3rd Qtr.
Order entry and fulfillment .................... 3rd Qtr. 3rd Qtr.
Inventory and cost accounting .................. 3rd Qtr. 3rd Qtr.
Accounts payable and purchasing ................ Completed Completed
Payroll ........................................ Completed(1) Completed(1)
General ledger ................................. Completed Completed
Production processing .......................... 3rd Qtr. 3rd Qtr.
Electronic commerce (EDI) ...................... 3rd Qtr. 3rd Qtr.(2)
Other non-IT systems ........................... 3rd Qtr.(3) 3rd Qtr.(3)
(1) The significant payroll systems for North America and Europe have been
completed. The upgrade of time collection systems in North America and
Europe will be completed in the third quarter 1999.
(2) In the United Kingdom, we expect to complete implementation of a new EDI
translator system and convert all supplier EDI transactions to the new
system in the third quarter. We will make significant progress with
customer EDI transactions, however, some of the conversion may not be
completed until the fourth quarter. All other EDI work in Europe has been
completed.
(3) Certain projects in the production area are now scheduled to be
completed in the third quarter versus the second quarter as previously
anticipated. The timing was extended in North America due to the
introduction of Dasani water which necessitated the diversion of resources
from certain Year 2000 projects to new product introduction. Also affecting
Europe and North America were the lead times for delivery of equipment and
parts and the scheduling of technical personnel.
In addition, we will be performing business unit systems integration testing
throughout the third and fourth quarters of 1999 to provide additional assurance
and confidence in the Year 2000 work performed. We have delayed certain IT
projects in order to reassign Company resources to the Year 2000 strategic plan.
Delayed projects primarily involve non-critical IT system enhancements.
We have incurred approximately $29 million to date in the implementation of our
Year 2000 strategic plan for both IT and non-IT systems of which $8 million has
been capitalized. The total cost through completion of our Year 2000 plan is
estimated to be in the range of $35 to $38 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 continues to be implemented.
- 19 -
<PAGE> 22
EURO CURRENCY CONVERSIONS
On January 1, 1999, 11 of 15 Member States 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 these
Member States. 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 among the countries of the
European Union. We have begun to implement and adjust our pricing and marketing
initiatives 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. We expect to have our
business requirements documented, our euro systems designed, and our
implementation schedule finalized by the end of 1999.
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 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.
TAX CONTINGENCY
The Company's bottler in Canada, which was acquired in 1997, is being audited
for the years 1990 through 1996 by Canadian taxing authorities. Although it is
early in the examination, the authorities have raised issues that could result
in an assessment of additional taxes. The bottler believes it has substantial
defenses to the issues being raised, however, it is too early to accurately
predict the amount of any ultimate assessment or the final outcome of this
matter. If an assessment were made, the authorities by law may require as much
as one-half of any amount assessed to become immediately due and payable
while the bottler pursues an appeal.
ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," in June 1998 and SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," in June 1999. SFAS No. 133 requires
that all derivatives be recorded at fair market values on the balance sheet and
establishes new accounting rules for hedging instruments. SFAS No. 137 defers
the effective date of SFAS No. 133 for one year. SFAS No. 133 will now be
effective for fiscal years beginning after June 15, 2000; early adoption is
allowed. The Company is conducting an evaluation of hedging policies and
strategies for existing derivatives and any future derivative transactions. The
effect of adoption on the Company's financial statements will ultimately depend
on the policies adopted.
- 20 -
<PAGE> 23
CAUTIONARY STATEMENTS
Certain expectations and projections regarding future performance of the Company
referenced in this 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
future events and uncertainties. Among the events and uncertainties which could
adversely affect future periods are any long-term impact on European sales
related to the second-quarter 1999 product quality concerns, lower than expected
net pricing resulting from increased marketplace competition, an inability to
meet performance requirements for expected levels of marketing support payments
from The Coca-Cola Company, material changes from expectations in the cost of
raw materials and ingredients, an inability to achieve the expected timing for
returns on cold drink equipment and employee infrastructure expenditures, an
inability to meet projections for performance in newly acquired territories,
unexpected costs associated with Year 2000 compliance or the business risk
associated with Year 2000 noncompliance by customers and/or suppliers,
unexpected costs or effect on European sales associated with conversion to the
common European currency (the euro), and unfavorable interest rate and currency
fluctuations. We caution readers that in addition to the above cautionary
statements, all forward-looking statements contained herein should be read in
conjunction with the detailed cautionary statements found on page 19 of the
Company's Annual Report for the fiscal year ended December 31, 1998.
- 21 -
<PAGE> 24
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
INCORPORATED BY
EXHIBIT REFERENCE
NUMBER DESCRIPTION OR FILED HEREWITH
- ------- ----------------------------------------------- -----------------
12 Statements regarding computations of ratios Filed Herewith
27 Financial Data Schedule for the quarter and six Filed Herewith
months ended July 2, 1999
(b) Reports on Form 8-K:
During second-quarter 1999, the Company filed the following current reports on
Form 8-K:
DATE OF REPORT DESCRIPTION
- -------------- ----------------------------------------------------------------
April 20, 1999 Condensed Consolidated Statements of Operations and Balance
Sheet (unaudited) of the Company, reporting results of
operations and financial position for the first quarter of 1999.
Report filed on April 27, 1999.
April 23, 1999 Press release announcing the Board's election of John R. Alm and
Norman P. Findley as Principal Operating Officers, Lowry F.
Kline as Chief Administrative Officer, Patrick J. Mannelly as
Chief Financial Officer, and John R. Parker as Corporate Vice
President effective April 23, 1999. Report filed on April 27,
1999.
June 24, 1999 Press release announcing the reintroduction of product in
Belgium and France. Report filed on June 28, 1999.
- 22 -
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COCA-COLA ENTERPRISES INC.
(Registrant)
Date: August 12, 1999 /s/ Patrick J. Mannelly
--------------------------------------------
Patrick J. Mannelly
Vice President and Chief Financial Officer
Date: August 12, 1999 /s/ Michael P. Coghlan
--------------------------------------------
Michael P. Coghlan
Vice President, Controller and
Principal Accounting Officer
- 23 -
<PAGE> 1
COCA-COLA ENTERPRISES INC. Exhibit 12
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(In millions except ratios)
QUARTER ENDED SIX MONTHS ENDED
-------------------- --------------------
JULY 2, JULY 3, JULY 2, JULY 3,
1999 1998 1999 1998
-------- -------- -------- --------
Computation of Earnings:
Earnings (loss) from
continuing operations
before income taxes....... $ 50 $172 $(41) $ 93
Add:
Interest expense.......... 179 175 361 349
Amortization of
capitalized interest.... 1 0 1 1
Amortization of debt
premium/discount
and expenses............ 7 7 15 13
Interest portion of rent
expense................. 8 7 14 13
---- ---- ---- ----
Earnings as Adjusted.......... $245 $361 $350 $469
==== ==== ==== ====
Computation of Fixed Charges:
Interest expense............ $179 $175 $361 $349
Capitalized interest........ 0 1 2 3
Amortization of debt premium
/discount and expenses.... 7 7 15 13
Interest portion of rent
expense................... 8 7 14 13
---- ---- ---- ----
Fixed Charges................. 194 190 392 378
Preferred Stock Dividends (b). 1 0 2 0
---- ---- ---- ----
Combined Fixed Charges and
Preferred Stock Dividends... $195 $190 $394 $378
==== ==== ==== ====
Ratio of Earnings to Fixed
Charges (a)................. 1.26 1.90 (c) 1.24
==== ==== ==== ====
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends (a)......... 1.25 1.90 (c) 1.24
==== ==== ==== ====
(a) Ratios were calculated prior to rounding to millions.
(b) Preferred stock dividends have been increased to an amount representing the
pretax earnings which would be required to cover such dividend
requirements.
(c) Earnings for the six months ended July 2, 1999 were insufficient to cover
fixed charges and combined fixed charges and preferred stock dividends by
$42 million and $44 million, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE FILER FOR THE PERIOD ENDED JULY 2, 1999
INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED JULY 2,
1999 (COMMISSION FILE NO. 001-9300) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> COCA-COLA ENTERPRISES
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