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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-2217
The Coca-Cola Company
(Exact name of Registrant as specified in its charter)
Delaware 58-0628465
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Coca-Cola Plaza 30313
Atlanta, Georgia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 676-2121
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
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Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock as of the latest practicable date.
Outstanding at close of business
Class of Common Stock on May 1, 1996
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$.25 Par Value 2,496,107,464 Shares
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THE COCA-COLA COMPANY AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited) Page Number
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income
Three months ended March 31, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 17
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Part I. Financial Information
Item 1. Financial Statements (Unaudited)
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions except share data)
ASSETS
March 31, December 31,
1996 1995
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CURRENT
Cash and cash equivalents $ 1,582 $ 1,167
Marketable securities 174 148
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1,756 1,315
Trade accounts receivable, less
allowances of $36 at March 31
and $34 at December 31 1,737 1,695
Finance subsidiary receivables 69 55
Inventories 1,190 1,117
Prepaid expenses and other assets 1,212 1,268
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TOTAL CURRENT ASSETS 5,964 5,450
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INVESTMENTS AND OTHER ASSETS
Equity method investments
Coca-Cola Enterprises Inc. 559 556
Coca-Cola Amatil Limited 705 682
Other, principally bottling companies 1,116 1,157
Cost method investments,
principally bottling companies 379 319
Finance subsidiary receivables and
investments 364 351
Marketable securities and other assets 1,264 1,246
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4,387 4,311
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PROPERTY, PLANT AND EQUIPMENT
Land 228 233
Buildings and improvements 1,915 1,944
Machinery and equipment 4,154 4,135
Containers 346 345
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6,643 6,657
Less allowances for depreciation 2,330 2,321
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4,313 4,336
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GOODWILL AND OTHER INTANGIBLE ASSETS 963 944
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$ 15,627 $ 15,041
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THE COCA-COLA COMPANY AND SUBSIDIARIES
LIABILITIES AND SHARE-OWNERS' EQUITY
March 31, December 31,
1996 1995
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CURRENT
Accounts payable and accrued expenses $ 2,920 $ 2,894
Loans and notes payable 2,852 2,371
Current maturities of long-term debt 289 552
Accrued taxes 1,684 1,531
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TOTAL CURRENT LIABILITIES 7,745 7,348
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LONG-TERM DEBT 1,149 1,141
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OTHER LIABILITIES 1,013 966
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DEFERRED INCOME TAXES 180 194
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SHARE-OWNERS' EQUITY
Common stock, $.25 par value -
Authorized: 5,600,000,000 shares
Issued: 3,425,780,156 shares at
March 31; 3,423,678,994 shares at
December 31 856 856
Capital surplus 895 863
Reinvested earnings 13,282 12,882
Unearned compensation related to
outstanding restricted stock (61) (68)
Foreign currency translation adjustment (449) (424)
Unrealized gain on securities
available-for-sale 122 82
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14,645 14,191
Less treasury stock, at cost
(926,690,000 shares at March 31;
919,081,326 shares at December 31) 9,105 8,799
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5,540 5,392
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$ 15,627 $ 15,041
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See Notes to Condensed Consolidated Financial Statements.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In millions except per share data)
Three Months Ended
March 31,
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1996 1995
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NET OPERATING REVENUES $ 4,194 $ 3,854
Cost of goods sold 1,530 1,445
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GROSS PROFIT 2,664 2,409
Selling, administrative and general expenses 1,631 1,530
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OPERATING INCOME 1,033 879
Interest income 54 64
Interest expense 72 57
Equity income (loss) (7) 24
Other income - net 25 21
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INCOME BEFORE INCOME TAXES 1,033 931
Income taxes 320 293
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NET INCOME $ 713 $ 638
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NET INCOME PER SHARE $ .28 $ .25
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DIVIDENDS PER SHARE $ .125 $ .11
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AVERAGE SHARES OUTSTANDING 2,503 2,545
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[FN]
See Notes to Condensed Consolidated Financial Statements.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)
Three Months Ended
March 31,
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1996 1995
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OPERATING ACTIVITIES
Net income $ 713 $ 638
Depreciation and amortization 112 110
Deferred income taxes (34) (1)
Equity income (loss), net of (in addition to)
dividends received 9 (23)
Foreign currency adjustments (14) 18
Other noncash items (7) (13)
Net change in operating assets and liabilities (126) (381)
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Net cash provided by operating activities 653 348
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INVESTING ACTIVITIES
Additions to finance subsidiary receivables (37) (23)
Collections of finance subsidiary receivables 13 19
Acquisitions and investments,
principally bottling companies (98) (15)
Purchases of securities (34) (39)
Proceeds from disposals of investments
and other assets 99 283
Purchases of property, plant and equipment (145) (228)
Proceeds from disposals of property, plant
and equipment 16 22
Other investing activities (10) (13)
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Net cash provided by (used in)
investing activities (196) 6
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Net cash provided by operations after
reinvestment 457 354
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FINANCING ACTIVITIES
Issuances of debt 512 100
Payments of debt (254) (213)
Issuances of stock 32 23
Purchases of stock for treasury (306) (440)
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Net cash used in financing activities (16) (530)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (26) 66
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CASH AND CASH EQUIVALENTS
Net increase (decrease) during the period 415 (110)
Balance at beginning of period 1,167 1,386
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Balance at end of period $ 1,582 $ 1,276
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INTEREST PAID $ 78 $ 69
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INCOME TAXES PAID $ 238 $ 279
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See Notes to Condensed Consolidated Financial Statements.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
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 for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and notes
required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there
has been no material change in the information disclosed in the
notes to consolidated financial statements included in the Annual
Report on Form 10-K of The Coca-Cola Company (the Company) for
the year ended December 31, 1995. In the opinion of Management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31,
1996, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.
Certain amounts in the prior period financial statements have
been restated to conform to the current period presentation.
NOTE B - SEASONAL NATURE OF BUSINESS
Unit sales of the Company's beverage products excluding those
products distributed by Coca-Cola Foods, are generally greater in
the second and third quarters due to seasonal factors.
NOTE C - INVENTORIES
Inventories consist of the following (in millions):
March 31, December 31,
1996 1995
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Raw materials and supplies $ 815 $ 784
Work in process 13 7
Finished goods 362 326
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$ 1,190 $ 1,117
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE D - SUMMARIZED INCOME STATEMENT DATA OF COCA-COLA ENTERPRISES INC.
At March 31, 1996 and 1995, the Company owned approximately 45
and 44 percent, respectively, of the outstanding common stock of
Coca-Cola Enterprises Inc. (Coca-Cola Enterprises) and,
accordingly, accounted for its related investment therein under
the equity method of accounting. The Company's ownership share
increased in the first quarter of 1996 as a result of Coca-Cola
Enterprises' repurchase of 4.5 million shares of its outstanding
common stock during the period. Coca-Cola Enterprises meets the
definition of a significant equity investee as defined by Rule
3-09 of Regulation S-X. Summarized income statement data for
Coca-Cola Enterprises is as follows (in millions):
Three Months Ended
March 31, March 31,
1996 1995
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Net operating revenues $ 1,600 $ 1,462
Gross profit $ 630 $ 561
Net income $ 7 $ 3
Net income available
to common share owners $ 5 $ 2
First quarter 1996 results include Coca-Cola Enterprises'
acquisition of the Ouachita Coca-Cola Bottling Company, Inc.,
from the date of acquisition on February 21, 1996. The period's
results also include the favorable settlement received from
certain suppliers for purchases made in previous years.
First quarter 1995 results include Coca-Cola Enterprises'
acquisition of the Wichita Coca-Cola Bottling Company from the
date of acquisition on January 27, 1995. First quarter 1995
results also reflect a $5 million after tax gain on the sale of
Coca-Cola Enterprises' 50 percent ownership interest in The
Coca-Cola Bottling Company of the Mid South.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE E - SHARE REPURCHASE PROGRAM
Under its share repurchase program, the Company purchased
approximately 7 million shares of its common stock during the
first quarter of 1996. The number of shares has been restated to
reflect the two-for-one stock split, effective May 1, 1996.
NOTE F - SUBSEQUENT EVENT
On April 17, 1996, the Company's share owners approved an
increase in the authorized common stock of the Company from 2.8
billion shares to 5.6 billion shares and a two-for-one stock
split payable to share owners of record at the close of business
on May 1, 1996. The financial statements have been retroactively
restated to reflect these changes. The stated par value of each
share remained at $.25 per share.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
VOLUME
BEVERAGES (EXCLUSIVE OF COCA-COLA FOODS): Worldwide unit case
volume increased 7 percent and gallon shipments of concentrates
and syrups grew 8 percent in the first quarter of 1996 when
compared to the first quarter of 1995.
Unit case volume in the Company's North America Group increased
more than 7 percent in the first quarter, including an increase
of 8 percent in the United States. The continuing strong unit
case volume gains in the United States resulted from increases in
the Company's core brands, as well as sales of new products, such
as POWERaDE, Fruitopia and Barq's. Continued focus on programs
designed to increase retail customer volume and profit also
contributed to first quarter results. North American gallon
shipments of concentrates and syrups increased 10 percent for the
first quarter.
In the Latin America Group, unit case volume grew 2 percent in
the first quarter, including gains of 5 percent in Brazil and
20 percent in Chile. Unit case volume declined 2 percent in
Mexico and 4 percent in Argentina due to continued economic
difficulties. Gallon shipments in the Latin America Group
increased 6 percent in the first quarter of 1996.
In the Africa Group, first quarter unit case volume grew 1
percent and gallon shipments declined 6 percent. Unit case
volume rose 9 percent in the Northern Africa Division and
declined 5 percent in the Southern Africa Division primarily due
to unseasonably cold and rainy weather in South Africa.
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RESULTS OF OPERATIONS (Continued)
Unit case volume in the Middle and Far East Group grew 14
percent in the first quarter, driven by a 41 percent increase in
China, a 48 percent increase in India, an 18 percent increase in
the Philippines and an 8 percent increase in Japan. Gallon
shipments in the Middle and Far East Group increased 5 percent in
the first quarter.
In the Greater Europe Group, first quarter unit case volume
increased 9 percent. Unit case volume grew 25 percent in the
East Central European Division, 15 percent in Great Britain and 8
percent in Germany. Gallon shipments in the Greater Europe Group
grew 14 percent in the first quarter.
Currently, the Company is involved in negotiations with
Coca-Cola Enterprises to sell its bottling and canning operations
in Belgium and France.
COCA-COLA FOODS: At Coca-Cola Foods, unit volume increased 9
percent in the first quarter versus the prior year as the result
of marketing initiatives including new advertising, packaging and
products for Minute Maid, Hi-C and Five Alive brands.
NET OPERATING REVENUES AND GROSS MARGIN
Net operating revenues increased 9 percent in the first quarter
versus the prior year, primarily due to increased gallon
shipments and price increases in certain markets.
The Company's gross margin increased to 63.5 percent in the
first quarter of 1996 from 62.5 percent in the first quarter of
1995. The increase in gross margin for the first quarter of 1996
was primarily due to a favorable mix of product sales, cost
containment in key raw materials, primarily packaging, and price
increases in certain markets.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling expenses were $1,260 million in the first quarter of
1996, compared to $1,173 million in the first quarter of 1995.
The increase was primarily due to higher marketing expenditures
in support of the Company's volume growth.
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RESULTS OF OPERATIONS (Continued)
Administrative and general expenses were $371 million in the
first quarter of 1996, compared to $357 million in the first
quarter of 1995. The $14 million increase was due primarily to
general increases in support of higher volume and modest
inflation, partially offset by a reduction in the costs of stock-
related employee benefits.
OPERATING INCOME AND OPERATING MARGIN
Operating income for the first quarter of 1996 increased to
$1,033 million, an 18 percent increase over the first quarter of
1995. The operating margin for the first three months of 1996
increased to 24.6 percent from 22.8 percent in the comparable
period in 1995.
INTEREST INCOME AND INTEREST EXPENSE
Interest income decreased in the first quarter of 1996 relative
to the comparable period in 1995, due primarily to lower average
invested cash equivalents and marketable securities balances
during the quarter. Interest expense increased in the first
quarter of 1996 relative to the comparable period in 1995, due
primarily to rising interest rates and higher debt balances used,
in part, to fund capital expenditures.
EQUITY INCOME (LOSS)
Equity income (loss) for the first quarter of 1996 was a net
loss of $(7) million, compared to income of $24 million in the
first quarter of 1995. The decrease in the first three months of
the year was due primarily to continued economic difficulties in
key markets in Latin America.
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RESULTS OF OPERATIONS (Continued)
OTHER INCOME - NET
Other income - net was $25 million for the first quarter of
1996 compared to $21 million for the first quarter of 1995. The
$4 million increase was due primarily to the gains on the sales
of certain bottling investments, none of which were individually
significant to the Company, and the effects of exchange rate
fluctuations.
INCOME TAXES
The Company's effective tax rate during the first quarter of
1996, relative to the comparable period in 1995, decreased to
31.0 percent from 31.5 percent. The Company's effective tax rate
reflects tax benefits derived from significant operations outside
the United States which are taxed at rates lower than the U.S.
statutory rate of 35 percent.
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FINANCIAL CONDITION
NET CASH FLOW PROVIDED BY OPERATIONS AFTER REINVESTMENT
In the first three months of 1996, net cash flow after
reinvestment totaled $457 million, an increase of $103 million
over the comparable period in 1995. Net cash provided by
operating activities increased $305 million as higher net income
was complemented by a reduced use of cash for operating assets
and liabilities in the first three months of 1996 relative to the
comparable period in 1995. Net cash was used in investing
activities in the first quarter of 1996, due primarily to reduced
proceeds from disposals of investments and other assets and
increased expenditures on acquisitions and investments.
Reinvestment in the form of property, plant and equipment, the
primary use of cash for investing activities, was $145 million
for the first three months of 1996, a decrease of approximately
$83 million from the comparable period in 1995.
The increase in trade accounts receivable, inventories,
accounts payable and accrued expenses at March 31, 1996 as
compared to December 31, 1995 was due primarily to seasonal
factors in the beverages business.
FINANCING
Financing activities primarily represent the Company's net
borrowing activities and share repurchases. Net cash used in
financing activities totaled $16 million and $530 million for the
first three months of 1996 and 1995, respectively. Net cash used
in financing activities decreased primarily due to a net increase
in borrowings of $258 million in the first quarter of 1996
compared to a net reduction in borrowings of $113 million in the
first quarter of 1995. Net borrowings were used, in part, to
finance capital expenditures. Cash used for share repurchases in
the first quarter of 1996 totaled $306 million, compared to
$440 million in the comparable period in 1995.
EXCHANGE
International operations are subject to certain opportunities
and risks, including currency fluctuations and governmental
actions. The Company closely monitors its methods of operating
in each country and adopts appropriate strategies responsive to
each environment. On a weighted average basis, the U.S. dollar
was approximately 7 percent stronger during the first quarter of
1996 versus key currencies for the comparable period of the prior
year.
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Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Share Owners was held on Wednesday, April
17, 1996, in Wilmington, Delaware, at which, prior to giving
effect to the two-for-one stock split, several matters were
submitted to a vote of the share owners:
(a) Votes cast for or withheld regarding the re-election of
four Directors for a term expiring in 1999 were as
follows:
FOR WITHHELD
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Cathleen P. Black 1,106,738,202 9,262,978
Warren E. Buffett 1,108,016,241 7,984,939
M. Douglas Ivester 1,108,047,603 7,953,577
Susan B. King 1,107,954,988 8,046,192
Additional Directors, whose terms of office as
Directors continued after the meeting, are as follows:
Term expiring in 1997 Term expiring in 1998
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Ronald W. Allen Herbert A. Allen
Donald F. McHenry Charles W. Duncan, Jr.
Paul F. Oreffice Roberto C. Goizueta
James B. Williams James D. Robinson III
Peter V. Ueberroth
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(b) Votes cast for or against and the number of abstentions
regarding each other matter voted upon at the meeting
were as follows:
BROKER
DESCRIPTION OF MATTER FOR AGAINST ABSTAIN NON-VOTES
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Proposal to amend Article
Fourth of the Certificate of
Incorporation to increase the
authorized Common Stock of
the Company from 2.8 billion
shares, par value $.25 per
share, to 5.6 billion shares,
par value $.25 per share, and
to effect a split of the
issued Common Stock of the
Company by changing each
issued share of Common Stock
into two shares of Common
Stock 1,109,539,773 2,215,482 4,245,925 0
Ratification of the
appointment of Ernst & Young
LLP as independent auditors
of the Company to serve
for the 1996 fiscal year 1,112,071,379 1,557,028 2,372,773 0
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3 - Certificate of Incorporation, including Amendment of
Certificate of Incorporation, effective May 1, 1996
12 - Computation of Ratios of Earnings to Fixed Charges
27 - Financial Data Schedule for the three months ended
March 31, 1996, submitted to the Securities and
Exchange Commission in electronic format
(b) Reports on Form 8-K:
No report on Form 8-K has been filed during the quarter
for which this report is filed.
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SIGNATURE
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.
THE COCA-COLA COMPANY
(REGISTRANT)
Date: May 10, 1996 By: /s/ Gary P. Fayard
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Gary P. Fayard
Vice President and Controller
(On behalf of the Registrant and
as Principal Accounting Officer)
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EXHIBIT INDEX
Exhibit Number and Description
3 - Certificate of Incorporation, including Amendment
of Certificate of Incorporation, effective May 1, 1996
12 - Computation of Ratios of Earnings to Fixed Charges
27 - Financial Data Schedule for the three months ended
March 31, 1996, submitted to the Securities and
Exchange Commission in electronic format