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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended October 1, 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.
425,474,650 SHARES OF $1 PAR VALUE COMMON STOCK AS OF NOVEMBER 4, 1999
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COCA-COLA ENTERPRISES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED OCTOBER 1, 1999
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the Quarters
ended October 1, 1999 and October 2, 1998...................... 1
Condensed Consolidated Statements of Income for the Nine Months
ended October 1, 1999 and October 2, 1998...................... 2
Condensed Consolidated Balance Sheets as of October 1, 1999
and December 31, 1998.......................................... 3
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended October 1, 1999 and October 2, 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................................. 23
Signatures................................................................ 24
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED; IN MILLIONS EXCEPT PER SHARE DATA)
QUARTER ENDED
---------------------------
OCTOBER 1, OCTOBER 2,
1999 1998
------------ ------------
NET OPERATING REVENUES ........................... $3,831 $3,528
Cost of sales .................................... 2,360 2,207
------ ------
GROSS PROFIT ..................................... 1,471 1,321
Selling, delivery, and administrative expenses ... 1,130 1,013
------ ------
OPERATING INCOME ................................. 341 308
Interest expense, net ............................ 186 179
------ ------
INCOME BEFORE INCOME TAXES ....................... 155 129
Income tax expense before rate change benefit .... 51 42
Income tax rate change benefit ................... -- (29)
------ ------
NET INCOME ....................................... 104 116
Preferred stock dividends ........................ 1 1
------ ------
NET INCOME APPLICABLE TO COMMON SHARE OWNERS ..... $ 103 $ 115
====== ======
BASIC NET INCOME PER SHARE APPLICABLE TO
COMMON SHARE OWNERS ............................ $ 0.24 $ 0.29
====== ======
DILUTED NET INCOME PER SHARE APPLICABLE TO
COMMON SHARE OWNERS ............................ $ 0.24 $ 0.28
====== ======
DIVIDENDS PER SHARE APPLICABLE TO
COMMON SHARE OWNERS ............................ $ 0.04 $ 0.04
====== ======
See Notes to Condensed Consolidated Financial Statements.
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED; IN MILLIONS EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
---------------------------
OCTOBER 1, OCTOBER 2,
1999 1998
------------ ------------
NET OPERATING REVENUES ........................... $10,897 $10,173
Cost of sales .................................... 6,836 6,380
------- -------
GROSS PROFIT ..................................... 4,061 3,793
Selling, delivery, and administrative expenses ... 3,388 3,054
------- -------
OPERATING INCOME ................................. 673 739
Interest expense, net ............................ 559 517
------- -------
INCOME BEFORE INCOME TAXES ....................... 114 222
Income tax expense before rate change benefit .... 37 75
Income tax rate change benefit ................... -- (29)
------- -------
NET INCOME ....................................... 77 176
Preferred stock dividends ........................ 3 1
------- -------
NET INCOME APPLICABLE TO COMMON SHARE OWNERS ..... $ 74 $ 175
======= =======
BASIC NET INCOME PER SHARE APPLICABLE TO
COMMON SHARE OWNERS ............................ $ 0.18 $ 0.45
======= =======
DILUTED NET INCOME PER SHARE APPLICABLE TO
COMMON SHARE OWNERS ............................ $ 0.17 $ 0.43
======= =======
DIVIDENDS PER SHARE APPLICABLE TO COMMON SHARE
OWNERS ......................................... $ 0.12 $ 0.105
======= =======
See Notes to Condensed Consolidated Financial Statements.
-2-
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
OCTOBER 1, DECEMBER 31,
ASSETS 1999 1998
------------ ------------
(Unaudited)
CURRENT
Cash and cash investments, at cost
approximating market ......................... $ 94 $ 68
Trade accounts receivable, less reserves
of $62 and $57 million, respectively ......... 1,366 1,337
Inventories:
Finished goods ............................... 417 373
Raw materials and supplies ................... 214 170
------- -------
631 543
Prepaid expenses and other current assets ...... 392 337
------- -------
Total Current Assets ....................... 2,483 2,285
PROPERTY, PLANT, AND EQUIPMENT
Land ........................................... 352 349
Buildings and improvements ..................... 1,266 1,237
Machinery and equipment ........................ 6,879 6,068
------- -------
8,497 7,654
Less allowances for depreciation ............... 3,430 2,956
------- -------
5,067 4,698
Construction in progress ....................... 258 193
------- -------
Net Property, Plant, and Equipment ........... 5,325 4,891
FRANCHISES AND OTHER NONCURRENT ASSETS, NET ...... 14,705 13,956
------- -------
$22,513 $21,132
======= =======
See Notes to Condensed Consolidated Financial Statements.
-3-
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT SHARE DATA)
OCTOBER 1, DECEMBER 31,
LIABILITIES AND SHARE-OWNERS' EQUITY 1999 1998
------------ ------------
(Unaudited)
CURRENT
Accounts payable and accrued expenses .......... $ 2,163 $ 2,257
Current portion of long-term debt .............. 1,462 1,140
------- -------
Total Current Liabilities .................. 3,625 3,397
LONG-TERM DEBT, LESS CURRENT MATURITIES .......... 9,762 9,605
RETIREMENT AND INSURANCE PROGRAMS AND OTHER
LONG-TERM OBLIGATIONS .......................... 1,052 977
LONG-TERM DEFERRED INCOME TAX LIABILITIES ........ 5,037 4,715
SHARE-OWNERS' EQUITY
Preferred stock ................................ 49 49
Common stock, $1 par value - Authorized -
1,000,000,000 shares; Issued - 448,143,011
and 446,319,946 shares, respectively ......... 448 446
Additional paid-in capital ..................... 2,657 2,190
Reinvested earnings ............................ 482 458
Accumulated other comprehensive income (loss) .. (66) (2)
Common stock in treasury, at cost (22,978,167
and 44,865,214 shares, respectively) ......... (533) (703)
------- -------
Total Share-Owners' Equity ................. 3,037 2,438
------- -------
$22,513 $21,132
======= =======
-4-
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COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN MILLIONS)
NINE MONTHS ENDED
---------------------------
OCTOBER 1, OCTOBER 2,
1999 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................... $ 77 $ 176
Adjustments to reconcile net income to net
cash derived from operating activities:
Depreciation ............................... 663 526
Amortization ............................... 335 286
Deferred income tax benefit ................ (32) (37)
Net changes in current assets and current
liabilities .............................. (317) (376)
Other ...................................... 71 45
------ ------
Net cash derived from operating activities ..... 797 620
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in capital assets .................. (942) (1,120)
Fixed asset disposals .......................... 5 6
Cash investments in bottling operations, net
of cash acquired ............................. (111) (225)
Other investing activities ..................... (115) (69)
------ ------
Net cash used in investing activities .......... (1,163) (1,408)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in commercial paper ............... 154 1,007
Issuances of long-term debt .................... 1,255 2,628
Payments on long-term debt ..................... (1,086) (2,305)
Stock purchases for treasury ................... (1) (454)
Cash dividend payments on common and
preferred stock .............................. (54) (42)
Exercise of employee stock options ............. 29 18
Cash received (paid) on currency hedges ........ 95 (17)
------ ------
Net cash derived from financing activities ..... 392 835
------ ------
NET INCREASE IN CASH AND CASH INVESTMENTS ........ 26 47
Cash and cash investments at beginning of
period ....................................... 68 45
------ ------
CASH AND CASH INVESTMENTS AT END OF PERIOD ....... $ 94 $ 92
====== ======
SUPPLEMENTAL NONCASH INVESTING AND FINANCING
ACTIVITIES:
Investments in bottling operations:
Fair value of assets acquired ................ $1,311 $2,248
Debt issued and assumed ...................... (115) (497)
Other liabilities assumed .................... (485) (865)
Equity issued ................................ (600) (661)
------ ------
Cash paid, net of cash acquired .............. $ 111 $ 225
====== ======
See Notes to Condensed Consolidated Financial Statements.
-5-
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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 third quarter and nine months ended October 1, 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 nine
months of 1999 include one less selling day than the first nine months 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 quantities of product being destroyed are significant. We have
contracted with a third party and have begun the process of destroying the
product. We anticipate the destruction process will continue through the first
quarter of 2000.
The recall costs above do 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 continues to expect recovery of some of
the nonrecurring recall costs from insurance and/or third parties; however, 1999
results do not include any potential reimbursement. Settlement of amounts and
timing of reimbursements are still being determined. Details of the nonrecurring
costs are as follows (in millions):
-6-
<PAGE> 9
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C - NONRECURRING COSTS (CONTINUED)
ACCRUAL
BALANCE AT
NONRECURRING OCTOBER 1,
COSTS 1999
------------ ------------
COST OF SALES
Costs of recalled product (including taxes and
third party handling) .......................... $ 59 $ 4
Destruction, transportation, and warehousing
costs .......................................... 32 22
---- ----
TOTAL COST OF SALES .............................. 91 26
SELLING, DELIVERY, AND ADMINISTRATIVE EXPENSES
Selling costs .................................... 7 7
Legal, delivery, and administrative costs ........ 5 2
---- ----
TOTAL SELLING, DELIVERY, AND ADMINISTRATIVE
EXPENSES ....................................... 12 9
---- ----
TOTAL ............................................ $103 $ 35
==== ====
NOTE D - ACQUISITIONS
In the first nine months of 1999 the Company completed the following
acquisitions in the United States and Europe for an aggregate purchase price of
approximately $730 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,
- Perryton Coca-Cola Bottling Company, Inc., operating in the
panhandles of Texas and Oklahoma,
- Sud Boissons S.A. and Societe Boissons Gazeuses de la Cote d'Azur,
operating in southern France and Monaco, and
- Big Bend Coca-Cola Bottling Company, operating in southwest Texas.
-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 Income beginning at 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.
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):
OCTOBER 1, DECEMBER 31,
1999 1998
------------ ------------
U.S. commercial paper (weighted average
rates of 4.3% and 4.5%)(A) .................. $ 1,618 $ 1,572
Canadian dollar commercial paper (weighted
average rates of 5.2% and 5.1%) ............. 779 626
Canadian dollar notes payable (weighted
average rate of 5.7%)(B) .................... 335 --
Notes due 1999 - 2037 (weighted average
rate of 6.8%)(C) ............................ 2,450 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 $1,577 and $1,598,
respectively) ............................... 355 334
Euro notes due 2002 - 2011 (weighted average
rate of 7.2%) ............................... 1,164 1,199
Various foreign currency debt ................. 491 869
Additional debt ............................... 225 178
------- -------
Long-term debt including effect of net asset
positions of currency swaps ............... 11,217 10,728
Net asset positions of currency swap
agreements(D) ............................. 7 17
------- -------
$11,224 $10,745
======= =======
-8-
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COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E - LONG-TERM DEBT (CONTINUED)
(A) At October 1, 1999 and December 31, 1998, $1,369 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 Euros, Canadian dollars, 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 nine 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) During the first nine months of 1999 the Company issued $300 million of
7.125% Notes due 2009 under its shelf registration statement with the
Securities and Exchange Commission.
(D) The net asset positions of currency swap agreements are included in the
balance sheet as assets.
Aggregate maturities of long-term debt for the five twelve-month periods
subsequent to October 1, 1999 are as follows (in millions): 2000 - $1,462; 2001
- - $533; 2002 - $2,543; 2003 - $261; and 2004 - $746.
The Company has domestic and international credit facilities to support its
commercial paper programs and other borrowings as needed. At October 1, 1999 and
December 31, 1998, the Company had $356 million and $687 million, respectively,
of short-term borrowings outstanding under these credit facilities. At October
1, 1999 and December 31, 1998, the Company had approximately $3.8 billion of
amounts available under domestic and international credit facilities.
At October 1, 1999 and December 31, 1998, approximately $2.3 billion and $2.4
billion, respectively, of borrowings due in the next 12 months were 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 October 1, 1999 and December 31, 1998, the Company had available for issuance
approximately $2.7 billion and $3.0 billion in registered debt securities under
a registration statement with the Securities and Exchange Commission. At October
1, 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 October
1, 1999 available for issuance under a Canadian Medium Term Note Program.
Subsequent to October 1, 1999, the Company issued $558 million in Notes due
2002-2021 with a weighted average interest rate of 5.5% and $118 million of 6.4%
Notes due 2002 under its Euro Medium Term Note Program and its Canadian Medium
Term Note Program, respectively.
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 nine months of 1999 and 1998
were 33% and 34%, respectively. A reconciliation of the income tax provision at
the statutory federal rate to the Company's actual income tax provision follows
(in millions):
NINE MONTHS ENDED
---------------------------
OCTOBER 1, OCTOBER 2,
1999 1998
------------ ------------
U.S. federal statutory expense ................... $ 40 $ 78
State (benefit) expense, net of federal
(expense) benefit .............................. (3) 5
Taxation of European and Canadian
operations, net ................................ (19) (20)
Valuation allowance provision .................... 10 4
Nondeductible items .............................. 8 7
Other, net ....................................... 1 1
---- ----
$ 37 $ 75
==== ====
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 nine 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 granted at
exercise prices in excess of fair market value.
An aggregate 1.8 million shares of common stock were issued during the first
nine months of 1999 from the exercise of stock options.
NOTE H - PREFERRED STOCK
In connection with the acquisition of The Coca-Cola Bottling Company of
Bellingham and the acquisition of Great Plains Bottlers and Canners, Inc., the
Company issued 96,900 shares of $1 par value voting convertible preferred stock
("Bellingham series") and issued 401,474 shares of $1 par value voting
convertible preferred stock ("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 shares of
the Company's common stock based on the stated value divided by a defined
conversion 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. During the third quarter of 1999, 8,670 shares of Bellingham series
were converted into 31,587 shares of common stock from Treasury. The increase in
additional paid-in capital resulting from the difference between the stated
value of the preferred stock and the cost of treasury stock issued was
approximately $1 million.
-10-
<PAGE> 13
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE I - COMPREHENSIVE INCOME
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 NINE MONTHS ENDED
-------------------------- --------------------------
OCTOBER 1, OCTOBER 2, OCTOBER 1, OCTOBER 2,
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net income ............ $ 104 $ 116 $ 77 $ 176
Currency items,
including tax
effects of hedges ... (5) (5) (64) (16)
----- ----- ----- -----
Comprehensive income .. $ 99 $ 111 $ 13 $ 160
===== ===== ===== =====
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 NINE MONTHS ENDED
-------------------------- --------------------------
OCTOBER 1, OCTOBER 2, OCTOBER 1, OCTOBER 2,
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net income .............. $ 104 $ 116 $ 77 $ 176
Preferred stock
dividends ............. 1 1 3 1
----- ----- ----- -----
Basic and diluted net
income applicable to
common share owners ... $ 103 $ 115 $ 74 $ 175
===== ===== ===== =====
Basic average common
shares outstanding .... 426 398 425 393
Effect of dilutive
securities:
Stock compensation
awards .............. 11 12 11 13
----- ----- ----- -----
Diluted average common
shares outstanding .... 437 410 436 406
===== ===== ===== =====
Basic net income per
share applicable to
common share owners ... $0.24 $0.29 $0.18 $0.45
===== ===== ===== =====
Diluted net income per
share applicable to
common share owners ... $0.24 $0.28 $0.17 $0.43
===== ===== ===== =====
-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 October 1,
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, France, Great Britain,
Luxembourg, Monaco, and the Netherlands (collectively referred to as the
"European" territories).
The following presents net operating revenues for the nine months ended October
1, 1999 and October 2, 1998 and long-lived assets as of October 1, 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 ............ $ 8,118 $15,389 $ 7,635 $14,121
European .................. 2,779 4,641 2,538 4,726
------- ------- ------- -------
Consolidated .............. $10,897 $20,030 $10,173 $18,847
======= ======= ======= =======
(A) Because of acquisitions, business seasonality, and sales prohibitions
resulting from the 1999 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
October 1, 1999, these cooperatives had approximately $138 million of
indebtedness guaranteed by the Company. The Company has letters of credit
outstanding aggregating approximately $130 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
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, Monaco, 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 $680
million in the third quarter of 1999, up from reported third-quarter 1998
results by 14%. Third-quarter 1999 cash operating profit grew 11% over
acquisition adjusted third-quarter 1998 results. The comparable third-quarter
and nine-month results reflect the combination of higher prices and improved
operating leverage in our North American territories and strong volume growth in
Europe, which more than offsets the anticipated decline in marketing support
received.
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 nine months 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 eight North American Coca-Cola bottling operations.
On July 30, 1999, we completed our acquisition of bottling operations in the
south of France and Monaco. In the third quarter of 1999, we acquired Big Bend
Coca-Cola Company, operating in southwest Texas.
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. 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 the immediate available capacity in the
market. We have contracted with a third party and have begun the process of
destroying the product. We anticipate the destruction process will continue
through the first quarter of 2000.
-13-
<PAGE> 16
The Company incurred approximately $103 million of nonrecurring costs in
connection with the recall, of which approximately $91 million was expensed in
cost of sales with the remaining amount included 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 continues to expect
recovery of some of the recall costs from insurance and/or third parties;
however, third-quarter 1999 results do not include any potential reimbursement.
Settlement of amounts and timing of reimbursements are still being determined.
Additionally, these costs do not include any financial impact related to lost
sales or the recall's potential impact on future sales.
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 nor for the period
subsequent to the recall. In addition to comparison adjustments for
acquisitions, volume information for the first nine months of 1998 has been
adjusted to include the same number of selling days as 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 nine months of 1999, COP was $1,671 million, up 8% from reported
nine-month 1998 results. The first nine months of 1999 had one less selling day
than the first nine 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,
nine-month 1999 COP exceeded comparable nine-month 1998 results by 10%. We
expect a comparable COP growth rate of 10% for full year 1999 and a 1999
earnings per share of approximately $0.25, after excluding the one-time product
recall costs and any potential settlement funds.
-14-
<PAGE> 17
VOLUME
Year-to-date volume results were impacted by our strategic initiative of
increasing prices and reduced sales during the second-quarter 1999 European
product quality problems. Sprite, diet Coke/Coke light, Fanta, and our
noncarbonated brands, including Dasani, demonstrated the strongest performance
in the third quarter of 1999.
- --------------------------------------------------------------------------------
THIRD-QUARTER 1999 NINE-MONTHS 1999
----------------------- ---------------------
REPORTED COMPARABLE REPORTED COMPARABLE
CHANGE CHANGE CHANGE CHANGE
- --------------------------------------------------------------------------------
Physical Case Bottle and Can
Volume:
Consolidated 5% 2 % 3% (1)%
North American Territories 2% (2)% 3% (2)%
European Territories 17% 15 % 2% 3 %
- --------------------------------------------------------------------------------
In the first nine months and third quarter of 1999, North America represented
77% and 76%, respectively, of total physical case volume and Europe contributed
the remaining percentages. The third-quarter 1999 North American volume
performance reflects strong growth in immediate consumption packages and
declines in multi-pack future consumption packages where some of the more
significant price increases have been implemented. As we focused on growing the
immediate consumption/high profit margin channels of our business and
implemented price increases in the multi-pack future consumption channels, the
immediate consumption channels experienced faster growth than the multi-pack
future consumption channels.
The third-quarter 1999 European volume performance reflects the execution of
strong marketing programs. Additionally, we experienced favorable weather
compared to the weather experienced in third-quarter 1998 that resulted in an 8%
volume decrease in Europe. In Europe, we focused on reintroducing our products
in the markets affected by the product quality problems with programs tailored
to the unique challenges we faced. Our territory most affected by the
second-quarter 1999 product recall, the Benelux region encompassing Belgium,
Luxembourg, and the Netherlands, experienced an increase of 18% in the third
quarter of 1999 over the same period in 1998. Volume in Great Britain, where no
product was recalled, increased 17% in the third quarter of 1999 while volume in
France grew 8%.
NET OPERATING REVENUES AND COST OF SALES
The Company's nine-month 1999 operating revenues increased 7% to almost $10.9
billion, reflecting the impact of the Company's 1998 and 1999 acquisitions and
1999 price increases offset by the Company's volume performance. In the third
quarter of 1999, net operating revenues increased 9% to $3.8 billion. Our
operations in North America represented 74% of third-quarter and nine-month 1999
net operating revenues, with Europe generating the remaining percentages.
Comparable net revenues per physical case to retailers (bottle and can) grew 4%
in the third quarter and first nine months of 1999. Excluding the impact of
currency translations, the third-quarter and nine-month 1999 increases would
have been 5% and 4.5%, respectively. Net revenues per case to retailers growth
throughout the first nine months of 1999 reflected our higher pricing and
favorable product, package, and channel mix shifts.
-15-
<PAGE> 18
Cost of sales per physical case (bottle and can) increased 1% for third-quarter
1999 and 3% for the first nine months of 1999. Cost of sales per case is
significantly impacted by the second-quarter 1999 nonrecurring product recall
costs. For the first nine months of 1999, comparable cost of sales per physical
case, which eliminates the impact of the nonrecurring product recall costs, did
not change significantly over the same period in 1998.
The cost of concentrate purchased from The Coca-Cola Company for the Company's
operations in the United States increased on October 4, 1999. This change
adjusts the estimated annualized concentrate cost increase for the United States
from approximately 3 percent to approximately 3.5 percent for 1999. The Company
continues to expect full-year 1999 cost of sales per case to increase at low
single digit levels, reflecting concentrate, certain packaging, and other
ingredient cost increases in the fourth quarter of 1999.
PER SHARE DATA
In the third quarter of 1999, net income applicable to common share owners was
$103 million, or $0.24 per diluted share. In the first nine months of 1999, net
income applicable to common share owners was $74 million or $0.17 per common
share. Excluding the second-quarter 1999 nonrecurring product recall costs of
$103 million pretax, or $0.16 per share after tax, net income per diluted share
for the first nine months of 1999 was $0.33 compared to 1998 diluted net income
of $0.36 per common share, adjusted to exclude the third-quarter 1998 one-time
United Kingdom tax rate change benefit of $0.07 per diluted 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, in 1999 the Company issued approximately 22
million shares of common stock in connection with its acquisitions.
SELLING, DELIVERY, AND ADMINISTRATIVE EXPENSES
In third-quarter 1999, consolidated selling, delivery, and administrative
expenses as a percent of net operating revenues increased to 29.5% from
third-quarter 1998 results of 28.7%. Year-to-date 1999 consolidated selling,
delivery, and administrative expenses as a percent of net operating revenues
increased to 31.1% from 30.0% for the first nine months 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
Third-quarter and year-to-date 1999 net interest expense increased from reported
1998 levels due to higher average debt balances, a result of the Company's 1998
and 1999 acquisitions, capital spending, and share repurchase programs. The
weighted average interest rate for the third quarter and first nine months of
1999 was 6.5% and 6.6%, respectively, compared to 6.9% and 7.0% in the third
quarter and first nine months of 1998, respectively.
-16-
<PAGE> 19
INCOME TAXES
The Company's effective tax rates for the first nine months of 1999 and 1998
were 33% and 34%, respectively. The effective tax rate for full-year 1998 was
33%. The Company's third-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 including incremental working capital related
to the Year 2000 transition, 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 October 1, 1999,
approximately $2.7 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.
Subsequent to October 1, 1999, the Company issued $558 million of 5.5% Notes and
$118 million of 6.4% Notes under its Euro Medium Term Note Program and its
Canadian Medium Term Note Program, respectively.
We satisfy seasonal working capital needs and other financing requirements with
bank borrowings and short-term borrowings under our commercial paper program and
other credit facilities. At October 1, 1999, we had approximately $356 million
outstanding under credit facilities, with an additional $3.8 billion available
under these facilities. 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 $26 million during the first nine months of
1999 from net cash transactions. Our primary sources of cash during the first
nine months of 1999 were proceeds from the issuance of debt and the increase in
commercial paper aggregating $1.4 billion, and proceeds from our operations of
approximately $768 million. Our primary uses of cash were for capital
expenditures totaling $942 million, and long-term debt payments totaling $1.1
billion.
Operating Activities: Operating activities resulted in $768 million of net cash
provided during the first nine months of 1999 compared to $620 million provided
by operations in the first nine 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 approximately
$1.5 billion in 1999 on capital expenditures.
-17-
<PAGE> 20
Financing Activities: The Company borrowed a net $154 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 nine months of 1999, the Company issued $1.3 billion 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 $942 million in the first nine months 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 nine months of 1999 activities in currency markets resulted in a
$64 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.
KNOWN TRENDS AND UNCERTAINTIES
YEAR 2000 COMPLIANCE
Our Year 2000 strategic plan identified initiatives necessary to minimize
failures of our 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) systems and substantially all of our non-IT
systems have been completed in a timely manner. Our plan was 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.
An important step in our strategic plan is the coordination of Year 2000
readiness with third parties. We continue to communicate 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 is
being used to finalize transition inventory plans and facilitate developing
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
prudently increasing our inventories at the end of 1999, as well as developing
plans to operate manually, if necessary. These plans will help to 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. The resulting templates were distributed to all
Company operations and have resulted in the development of location-specific
continuity plans, which will be used in the event our automated systems are
not available. A review by our Year 2000 team of these plans will take place
in all divisions of the Company by the end of November 1999.
-18-
<PAGE> 21
The following table lists significant systems and our status with respect to
Year 2000 readiness:
North America Europe
------------- -------------
Revenue, billing, and accounts receivable Completed Completed
Order entry and fulfillment Completed Completed
Inventory and cost accounting Completed Completed
Accounts payable and purchasing Completed Completed
Payroll Completed Completed
General ledger Completed Completed
Production processing Completed Completed
Electronic commerce (EDI) Completed Completed
Other non-IT systems Completed Completed
In addition, we will perform business unit systems integration testing
throughout the fourth quarter of 1999 to provide 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 $33 million through the end of third-quarter 1999
in the implementation of our Year 2000 strategic plan for both IT and non-IT
systems of which $9 million has been capitalized. The total cost through
completion of our Year 2000 plan is estimated to be in the range of $35 to $37
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 is January
1, 1999 through January 1, 2002 and by July 1, 2002, all national currencies
will be replaced by the euro.
We have 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.
The Company is in the process of identifying all material risks and is
developing an implementation plan for the conversion to the euro. The following
table lists certain milestones identified and their projected completion dates
with respect to the euro conversion.
MILESTONES KEY DATES
------------------------------------------ --------------
Business requirements gathering Completed
Solution design and schedule 4th Qtr. 1999
Development of solutions 3rd Qtr. 2000
Implementation of solutions 4th Qtr. 2000
Begin managing business operations in euro 1st Qtr. 2001
Vending machines ready for euro coinage 4th Qtr. 2001
Finalize local currency conversions 2nd Qtr. 2002
As of third quarter 1999 the Company had incurred and expensed less than $1
million in costs associated with this conversion process. The Company estimates
the total cost to complete this project will be in the range of $30 million to
$40 million, of which approximately 70% will be capitalized. These costs
represent the principal projects to be undertaken to ensure a smooth conversion.
Our business resources currently available are sufficient to meet the
requirements needed to complete the euro initiative. The euro system activities
will be a key part of our system standardization process, which is ongoing.
Total IT spending in Europe for 2000 is expected to approximate 1999 IT spending
levels.
The euro conversion may have long-term competitive pricing implications by
creating cross-border product price transparency among the countries of the
European Union and by changing established local currency price points. We are
continuing to assess our pricing and marketing strategies in order to ensure we
remain competitive locally and in the broader European market. However, we
cannot reasonably predict 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. Additionally, the Company may be at risk to the extent
third parties are unable to deal effectively with the impact of the euro
conversion, which in turn could impact Company operations.
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
accounting records. However, due to the numerous uncertainties we cannot be
assured that all issues related to the euro conversion have been identified and
that any additional issues would not have a material effect on the Company's
operations or financial condition.
-20-
<PAGE> 23
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 ("FASB") 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.
In September 1999 the FASB issued an exposure draft that would amend APB Opinion
No. 16, "Business Combinations," and supersede APB Opinion No. 17, "Intangible
Assets." This exposure draft proposes to modify the method of accounting for
business combinations and addresses the accounting for intangible assets. The
Company is currently examining the effect these proposed changes may have on the
operating results and the financial statements of the Company.
-21-
<PAGE> 24
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,
uncertainty of expected reimbursements from insurance and/or third parties
relating to the second-quarter European recall costs, an inability to meet
projections for performance in newly acquired territories, potential assessment
of additional taxes resulting from audits conducted by the Canadian taxing
authorities, 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.
-22-
<PAGE> 25
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):
Exhibit Incorporated by Reference
Number Description or Filed Herewith
- -------- --------------------------------------- ---------------------------
12 Statements regarding computations Filed Herewith
of ratios
27 Financial Data Schedule for the quarter Filed Herewith
and nine months ended October 1, 1999
(b) Reports on Form 8-K:
During third-quarter 1999, the Company filed the following current reports on
Form 8-K:
Date of Report Description
- ------------------ -----------------------------------------------------------
July 20, 1999 Condensed Consolidated Statements of Operations and
Balance Sheet (unaudited) of the Company, reporting results
of operations and financial position for the second quarter
of 1999. Report filed on July 23, 1999.
September 14, 1999 Press release announcing the Company's selection of
Utendahl Capital Partners, L.P. to lead manage an upcoming
intermediate debt transaction. Report filed on September
14, 1999.
-23-
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COCA-COLA ENTERPRISES INC.
(Registrant)
Date: November 8, 1999 /s/ Patrick J. Mannelly
-------------------------------
Patrick J. Mannelly
Vice President and Chief
Financial Officer
Date: November 8, 1999 /s/ Michael P. Coghlan
-------------------------------
Michael P. Coghlan
Vice President, Controller and
Principal Accounting Officer
-24-
<PAGE> 1
EXHIBIT 12
COCA-COLA ENTERPRISES INC.
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(In millions except ratios)
Quarter ended Nine months ended
------------------ ------------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
1999 1998 1999 1998
------- ------- ------- -------
Computation of Earnings:
Earnings (loss) from continuing
operations before income
taxes........................... $156 $129 $114 $222
Add:
Interest expense................ 180 171 541 520
Amortization of
capitalized interest.......... 0 0 1 1
Amortization of debt premium/
discount and expenses......... 7 7 22 20
Interest portion of rent
expense....................... 7 8 21 21
---- ---- ---- ----
Earnings as Adjusted................ $350 $315 $699 $784
==== ==== ==== ====
Computation of Fixed Charges:
Interest expense.................. $180 $171 $541 $520
Capitalized interest.............. 0 2 2 4
Amortization of debt premium/
discount and expenses........... 7 7 22 20
Interest portion of rent
expense......................... 7 8 21 21
---- ---- ---- ----
Fixed Charges....................... 194 188 586 565
Preferred Stock Dividends........... 1 0 4 0
---- ---- ---- ----
Combined Fixed Charges and
Preferred Stock Dividends........ $195 $188 $590 $565
==== ==== ==== ====
Ratio of Earnings to Fixed
Charges (a)...................... 1.80 1.68 1.19 1.39
==== ==== ==== ====
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends (a).............. 1.79 1.68 1.19 1.39
==== ==== ==== ====
(a) Ratios were calculated prior to rounding to millions.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE FILER FOR THE PERIOD ENDED OCTOBER 1, 1999
INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED OCTOBER
1, 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, INC.
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