-------------------------------------------------------
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 quarter ended March 31,June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________---------- to ____________----------
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, N.W. 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 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
Registrant's classes of Common Stock as of the latest practicable
date.
Class of Common Stock Outstanding at AprilJuly 29, 1994
--------------------- ----------------------------------------------------
$.25 Par Value 1,293,362,9311,289,719,361 Shares
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-2-
THE COCA-COLA COMPANY AND SUBSIDIARIES
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements (Unaudited) Page Number
Condensed Consolidated Balance Sheets
March 31,June 30, 1994 and December 31, 1993 3
Condensed Consolidated Statements of Income
Three and six months ended March 31,June 30, 1994 and 1993 5
Condensed Consolidated Statements of Cash Flows
ThreeSix months ended March 31,June 30, 1994 and 1993 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information
Item 4. Submissions of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 1615
-3-
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,June 30, December 31,
1994 1993
----------- -----------
CURRENT
Cash and cash equivalents $ 9591,221 $ 998
Marketable securities 141135 80
----------- -----------
1,1001,356 1,078
Trade accounts receivable, less
allowances of $40$33 at March 31June 30
and $39 at December 31 1,2371,494 1,210
Finance subsidiary receivables 3340 33
Inventories 1,0711,166 1,049
Prepaid expenses and other assets 1,1271,237 1,064
----------- -----------
TOTAL CURRENT ASSETS 4,5685,293 4,434
----------- -----------
INVESTMENTS AND OTHER ASSETS
Equity method investments
Coca-Cola Enterprises Inc. 494510 498
Coca-Cola Amatil Limited 632656 592
Other affiliated businesses 1,0411,032 1,037
Cost method investments in affiliated
businesses 149196 88
Finance subsidiary receivables 264270 226
Marketable securities and other assets 887891 868
----------- -----------
3,4673,555 3,309
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 207215 197
Buildings and improvements 1,6761,779 1,616
Machinery and equipment 3,5003,631 3,380
Containers 381402 403
----------- -----------
5,7646,027 5,596
Less allowances for depreciation 1,9402,042 1,867
----------- -----------
3,8243,985 3,729
----------- -----------
GOODWILL AND OTHER INTANGIBLE ASSETS 550568 549
----------- -----------
$ 12,40913,401 $ 12,021
=========== ===========
-4-
THE COCA-COLA COMPANY AND SUBSIDIARIES
LIABILITIES AND SHARE-OWNERS' EQUITY
March 31,June 30, December 31,
1994 1993
----------- -----------
CURRENT
Accounts payable and accrued expenses $ 2,1302,496 $ 2,217
Loans and notes payable 1,5961,721 1,409
Finance subsidiary notes payable 275274 244
Current maturities of long-term debt 146 19
Accrued taxes 1,2771,341 1,282
----------- -----------
TOTAL CURRENT LIABILITIES 5,2925,838 5,171
----------- -----------
LONG-TERM DEBT 1,4401,471 1,428
----------- -----------
OTHER LIABILITIES 731743 725
----------- -----------
DEFERRED INCOME TAXES 130133 113
----------- -----------
SHARE-OWNERS' EQUITY
Common stock, $.25 par value -
Authorized: 2,800,000,000 shares
Issued: 1,704,671,9671,705,771,998 shares at March 31;June 30;
1,703,526,299 shares at December 31 426 426
Capital surplus 1,1071,132 1,086
Reinvested earnings 9,72610,231 9,458
Unearned compensation related to
outstanding restricted stock (81)(78) (85)
Foreign currency translation adjustment (369)(269) (420)
Unrealized gain on securities
available-for-sale 5456 --
----------- -----------
10,86311,498 10,465
Less treasury stock, at cost
(410,048,000(415,868,011 common shares at March 31;June 30;
406,072,817 common shares at
December 31) 6,0476,282 5,881
----------- -----------
4,8165,216 4,584
----------- -----------
$ 12,40913,401 $ 12,021
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
-5-
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In millions except per share data)
Three Months Ended March 31,
-----------------------June 30, Six Months Ended June 30,
-------------------------- -------------------------
1994 1993 ----------- -----------1994 1993
---------- ---------- ---------- ----------
NET OPERATING REVENUES $ 3,3524,342 $ 3,0563,899 $ 7,694 $ 6,955
Cost of goods sold 1,242 1,093
----------- -----------1,667 1,464 2,909 2,557
---------- ---------- ---------- ----------
GROSS PROFIT 2,110 1,9632,675 2,435 4,785 4,398
Selling, administrative
and general expenses 1,338 1,286
----------- -----------1,605 1,476 2,943 2,762
---------- ---------- ---------- ----------
OPERATING INCOME 772 6771,070 959 1,842 1,636
Interest income 35 3544 32 79 67
Interest expense 43 4650 40 93 86
Equity income 7 2957 39 64 68
Other deductions - net 11 39
----------- -----------14 10 25 49
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES
AND CHANGE IN ACCOUNTING
PRINCIPLE 760 6561,107 980 1,867 1,636
Income taxes 239 202
----------- -----------349 302 588 504
---------- ---------- ---------- ----------
INCOME BEFORE CHANGE IN
ACCOUNTING PRINCIPLE 521 454758 678 1,279 1,132
Transition effect of
change in accounting
for postemployment
benefits -- -- -- (12)
----------- --------------------- ---------- ---------- ----------
NET INCOME $ 521758 $ 442
=========== ===========678 $ 1,279 $ 1,120
========== ========== ========== ==========
INCOME PER SHARE
Before change in
accounting principle $ .40.59 $ .35.52 $ .99 $ .87
Transition effect of
change in accounting
for postemployment
benefits -- -- -- (.01)
----------- --------------------- ---------- ---------- ----------
NET INCOME PER SHARE $ .40.59 $ .34
=========== ===========.52 $ .99 $ .86
========== ========== ========== ==========
DIVIDENDS PER SHARE $ .195 $ .170 =========== ===========$ .39 $ .34
========== ========== ========== ==========
AVERAGE SHARES
OUTSTANDING 1,296 1,306
=========== ===========1,292 1,303 1,294 1,304
========== ========== ========== ==========
See Notes to Condensed Consolidated Financial Statements.
-6-
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)
ThreeSix Months Ended
March 31,
-----------------------June 30,
---------------------------
1994 1993
---------- ---------------------
OPERATING ACTIVITIES
Net income $ 5211,279 $ 4421,120
Transition effect of change in
accounting principle -- 12
Depreciation and amortization 91 88193 173
Deferred income taxes 8 16 (19)
Equity income, net of dividends -- (21)59 (36)
Foreign currency adjustments (5) 8(3) (10)
Other noncash items 2 1622 12
Net change in operating assets
and liabilities (274) (302)(310) (242)
----------- -----------
Net cash provided by operating activities 343 2591,256 1,010
----------- -----------
INVESTING ACTIVITIES
Additions to finance subsidiary receivables (43) (5)(59) (26)
Collections of finance subsidiary receivables 5 1416 23
Acquisitions and investments in
affiliated businesses (7) (22)(151) (337)
Purchases of securities (91) (49)(235) (261)
Proceeds from disposals of securities
and other assets 25 109225 525
Purchases of property, plant and equipment (185) (209)(364) (398)
Proceeds from disposals of property, plant
and equipment 17 1727 24
Other investing activities 14 --(10) (14)
----------- -----------
Net cash used in investing activities (265) (145)(551) (464)
----------- -----------
Net cash provided by operations after
reinvestment 78 114705 546
----------- -----------
FINANCING ACTIVITIES
Issuances of debt 228 268360 436
Payments of debt (12) (262)
Common(28) (267)
Issuances of stock issued 18 1541 121
Purchases of common stock for treasury (166) (107)(402) (436)
Dividends (187) (200)(470) (422)
----------- -----------
Net cash used in financing activities (119) (286)(499) (568)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 2 (10)17 (1)
----------- -----------
CASH AND CASH EQUIVALENTS
Net decreaseincrease (decrease) during the period (39) (182)223 (23)
Balance at beginning of period 998 956
----------- -----------
Balance at end of period $ 9591,221 $ 774933
=========== ===========
INTEREST PAID $ 5798 $ 5996
=========== ===========
INCOME TAXES PAID $ 228570 $ 178314
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
-7-
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, 1993. 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 threesix month period ended March 31,June 30, 1994, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1994.
The Company adopted Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS 115) as
of January 1, 1994. The Company recorded an increase to share-owners' equity
of $60 million from the adoption of SFAS 115.
The Company filed a Form 8-K on January 27, 1994, restating the 1993
quarterly reports for the adoption of Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment Benefits (SFAS 112).
as of January 1, 1993. Results for the first quarter of 1993 were restated to
include the recognition of a one-time, noncash, after-tax charge of $12 million
which is net of income tax benefits of $8 million. The transition effect
charge consists primarily of health benefits for surviving spouses and disabled
employees. The adoption impact of SFAS 112 on the Company's bottling investees
accounted for by the equity method was immaterial and, therefore, was not
included in the transition effect charge. Net income per share for the first
quarter of 1993 was reduced by $0.01 for the adoption of SFAS 112.
Certain amounts in the 1993 condensed consolidated financial statements have
been reclassified to conform to the current year presentation.
NOTE B - SEASONAL NATURE OF BUSINESS
Unit sales of the Company's soft drink products are generally greater in the
second and third quarters due to seasonal factors.
-8-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE C - INVENTORIES
Inventories consist of the following (in millions):
March 31,June 30, December 31,
1994 1993
----------- -----------------------
Raw materials and supplies $ 678767 $ 689
Work in process 810 4
Finished goods 385389 356
----------- -----------
$ 1,0711,166 $ 1,049
=========== ===========
NOTE D - SUMMARIZED INCOME STATEMENT DATA OF COCA-COLA ENTERPRISES INC.
At March 31,June 30, 1994 and 1993, the Company owned approximately 43 percent 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. 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 -----------------------
AprilSix Months Ended
------------------------ ------------------------
July 1, AprilJuly 2, July 1, July 2,
1994 1993 ----------- -----------1994 1993
---------- ---------- ---------- ----------
Net operating revenues $ 1,3201,610 $ 1,2081,448 $ 2,929 $ 2,656
Gross profit 521 477623 556 1,143 1,033
Net loss (6) (5)income 38 16 32 12
Net lossincome available
to common share owners (7) (5)38 16 31 12
NOTE E - SHARE REPURCHASE PROGRAM
During the first quarter of 1994,Under its share repurchase program, the Company purchased approximately 46
million shares of its common stock.stock in the second quarter and approximately 10
million shares for the six months ended June 30, 1994.
-9-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F - FINANCIAL INSTRUMENTS
As discussed in Note A, the Company adopted SFAS 115 at January 1, 1994,
changing the method of accounting for certain debt and marketable equity
security investments from a historical cost basis to a fair value approach.
Under SFAS 115, investments in debt and marketable -9-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
equity securities, other
than investments accounted for by the equity method, are categorized as either
trading securities, securities available-for-sale or securities held-to-maturity.held-to-
maturity. At January 1, 1994, the Company had no trading securities.
Securities categorized as available-for-sale are stated at fair value, with
unrealized gains and losses, net of deferred taxes, reported in share-owners'
equity. Debt securities categorized as held-to-maturity are stated at
amortized cost. Available-for-sale and held-to-maturity securities, at January
1, 1994, consisted of the following (in millions):
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Available-for-sale
securities
Equity securities $ 43 $ 103 $ -- $ 146
Collateralized
mortgage obligations 105 1 -- 106
Other debt securities 36 -- -- 36
---------- ---------- ---------- ----------
Total $ 184 $ 104 $ -- $ 288
========== ========== ========== ==========
Held-to-maturity
securities
Bank and corporate
debt $ 1,008 $ -- $ 2 $ 1,006
Other securities 124 -- 1 123
---------- ---------- ---------- ----------
Total $ 1,132 $ -- $ 3 $ 1,129
========== ========== ========== ==========
These investments were included in the following captions on the condensed
consolidated balance sheet (in millions):
January 1, 1994
----------------------------------------------
Available- Held-to-
for-Sale Maturity
Securities Securities
----------- --------------------- ----------
Cash and cash equivalents $ -- $ 777
Marketable securities 93 9
Cost method investments
in affiliated businesses 84 --
Marketable securities and
other assets 111 346
----------- -----------
$ 288 $ 1,132
=========== ===========
-10-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The contractual maturities of these investments as of January 1, 1994, were
as follows (in millions):
Available-for-Sale Securities Held-to-Maturity Securities
----------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
1994 $ 34 $ 34 $ 786 $ 786
1995 - 1998 2 2 326 323
After 1998 -- -- 20 20
--- --- --- ---Available-for-Sale Securities Held-to-Maturity Securities
----------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----- ----- ----- -----
1994 $ 34 $ 34 $ 786 $ 786
1995 - 1998 2 2 326 323
After 1998 -- -- 20 20
---- ---- ------ ------
36 36 1,132 1,129
Collateralized
mortgage
obligations 105 106 -- --
Equity securities 43 146 -- --
---- ---- ------ ------
Total $184 $288 $1,132 $1,129
==== ==== ====== ======
NOTE G - CONTINGENCIES
In March 1994, the Tokyo Regional Taxation Bureau in Japan issued an
assessment claimingalleging that royalties paid by a wholly-owned subsidiary of the
Company were in excess of an arm's length price during fiscal years 1990, 1991
and 1992. The Company complied with the National Tax Administration Agency's
pre-confirmation system through prompt communication of royalty rates existing
during the assessment period and strongly disagrees with the assessment. This matter will beis
being reviewed by the United States and Japanese tax authorities under the
treaty signed by the two nations to prevent double taxation. If upheld, the
assessment would require the Company to pay additional taxes in Japan. However, anyThe
Company has been granted suspension of enforcement against payment of the tax
while this matter is under consideration by United States and Japanese tax
authorities. This suspension of enforcement is supported by a bank guarantee
by Mitsubishi Bank, Limited. The Company has agreed to indemnify Mitsubishi if
amounts are paid pursuant to the guarantee. Any additional tax liability in
Japan should be fully offset by tax credits in the United States.States and would not
adversely affect earnings.
-11-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
VOLUME
SOFT DRINKS: Worldwide unit case volume increased approximately 7 percent in both the
second quarter and worldwidefor the first six months of 1994 when compared to 1993.
Worldwide gallon shipments of soft drink concentrates and syrups also grew 67
percent in both the second quarter and for the first quartersix months of 1994 when compared to the first quarter of
1993.year.
In the North America sector, unit case volume sold to retail customers grew 76
percent in the firstsecond quarter, led byincluding an increase of 76 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 aswhich benefited from the
ongoing introduction of the "contour" package for Coca-Cola classic and
diet Coke, and the Sprite advertising campaign. Volume also rose from sales
of new products, such as PowerAde, Nestea PowerAde and Minute Maid Juices To Go.
Continued focus on programs designed to increase customer volume and profit
also contributed to firstsecond quarter results. North American gallon shipments
of concentrates and syrups to bottlers and distributors increased 117 percent
for the firstsecond quarter, including growth of 118 percent in the United States.
InternationalFor the year to date, North American gallon shipments of concentrates and syrups advanced 3rose 9 percent,
andincluding a 9 percent increase in the United States. Unit case volume in
North America grew 6 percent for the year to date, including 6 percent growth
in the United States.
International unit case volume increased more than 67 percent and gallon shipments grew
8 percent in the first quarter of
1994.second quarter.
International unit case volume wasincreases in the second quarter were led by a
3332 percent increase in the Northeast Europe/Middle East Group, which camecomes on
top of 2025 percent growth in the prior year. This group continues to benefit from rapid expansion into
emerging soft drink markets. UnitSecond quarter unit case volume in
the Middle East Division, the East Central European Division and the Nordic and
Northern Eurasia Division advanced 3229 percent, 2211 percent and 126 percent,
respectively. First quarterIn Egypt, unit case volume in India reached 12 million cases, as the Company began its
first full year of operation in that country since 1977. Gallon shipments of
concentrates and syrups increased 13grew 40 percent in the firstsecond quarter
as a result of increased efficiencies in the distribution system. Gallon
shipments increased 27 percent in the second quarter in the Northeast
Europe/Middle East Group. For the year to date, unit case volume and gallon
shipments increased 32 percent and 22 percent, respectively.
In the Latin America Group, first quarter unit case volume grew 59 percent in the second
quarter, led by an 11gains of 12 percent gainin Chile, 12 percent in Mexico, and 713
percent in Argentina; growth in Chile,was partially offset by a 52 percent decline in
Brazil, where consumers continue to experience a lack of purchasing power due
to thea difficult economic environment. The gain in Latin America resulted from
aggressive system investment in volume building activities such as new
packaging initiatives and focused brand promotions. Gallon shipments in the
Latin America Group increased 6 percent in the second quarter of 1994. For the
year to date, unit case volume and gallon shipments both grew 7 percent in the
first quarter.
UnitLatin America Group.
-12-
RESULTS OF OPERATIONS (CONTINUED)
Second quarter unit case volume in the Africa Group declined 4 percent inwas even with the first quarter,
impacted byprior
year due to a difficult economic environment throughout the region and social unrest in certainseveral key
markets. Gallon shipments in the Africa Group for the quarter increased 5
percent. Unit case volume decreased 161 percent and gallon shipments declined 7
percent in the Africa Group for the first quarter due to inventory depletion atsix months of the bottler
level.
-12-
RESULTS OF OPERATIONS (CONTINUED)year.
Unit case volume in the Pacific Group grew 107 percent in the firstsecond quarter,
leddriven by increases of 29a 25 percent increase in China 13and a 15 percent increase in Australia and 11 percent
in the Philippines. First quarter unitThailand.
Unit case volume roseincreased 1 percent in Japan, impacted by a difficult
economic environment. Gallon shipments of concentrates
and syrups in the Pacific Group increased 7comparison to a 10 percent in the first quarter.
In the European Community Group, first quarter unit case volume grew 2
percent. Increases of 7 percent in Spain, 4 percent in France and 2 percent in
Germany were partially offset by a 3 percent decline in Great Britain, which
faced a tough comparison due to 11 percent growthincrease in the prior year. Gallon shipments in the
Pacific Group increased 11 percent in the second quarter. For the first six
months of the year, unit case volume grew 8 percent and gallon shipments
increased 9 percent in the Pacific Group.
In the European Community Group, declined 3unit case volume in the second quarter was
even with the prior year. Unit case volume grew 7 percent in Spain, offset by
unit case volume declines of 4 percent in Germany and Italy due to tough
economic conditions. Gallon shipments in the first
quarter.European Community Group were
even in the second quarter versus the prior year. For the year to date in the
European Community Group, unit case volume increased 1 percent and gallon
shipments declined 1 percent.
FOODS: At Coca-Cola Foods, operating income advanced strongly versus the
prior year. Unitunit volume increased 32 percent in the second
quarter, impacted by a difficult comparison to a 3915 percent increase in the
firstsecond quarter of 1993. DuringUnit volume grew 3 percent for the quarter, Coca-Cola Foods completedfirst six months of
the national rollout of Minute Maid
Naturals, a line of shelf-stable multi-serve juices and juice drinks.year.
NET OPERATING REVENUES AND GROSS MARGIN
Net operating revenues grew 10 percent in the second quarter and the first quartersix months of 1994
while
gross profit grew 7 percent. Net revenue growth wasincreased 11 percent, primarily due primarily to increased soft drink gallon shipments,
selected price increases and continued expansion of the Company's bottling and
canning operations.
The Company's gross margin was 62 percent in the second quarter of 1994 and
1993. The Company's gross margin decreased to 62 percent in the first six
months of 1994 as compared to 63 percent in the first quarter of
1994 as compared to 64 percent in the first quartersix months of 1993. The
decrease in gross margin for the first six months of 1994 was due primarily to
re-entry into the South African market, a change in product mix for certain
international locations and higher sweetener costs.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling expenses were $1,050 million$1.3 billion in the firstsecond quarter of 1994, compared to
$965 million$1.2 billion in the firstsecond quarter of 1993. For the first six months of the
year, selling expenses were $2.4 billion, 10 percent greater than the same
period in 1993. The increase was primarily due to higher marketing investments
in support of the Company's volume growth.
-13-
RESULTS OF OPERATIONS (CONTINUED)
Administrative and general expenses were $288$296 million in the firstsecond quarter,
a 102 percent decrease from the firstsecond quarter of 1993. ThisFor the first six months
of 1994, administrative and general expenses were $582 million, a 7 percent
decrease wasfrom the comparable period of the prior year. The decreases on a
quarterly and year to date basis were due primarily to a reduction in the costs
of stock-related employee benefits and increased efficiencies in the Company's
domestic and corporateworldwide operations. -13-
RESULTS OF OPERATIONS (CONTINUED)
OPERATING INCOME AND OPERATING MARGIN
Operating income infor the firstsecond quarter of 1994 increased to $772 million,$1.1 billion, a
1412 percent increase over the firstsecond quarter of 1993. TheFor the first six months
of 1994, operating income increased 13 percent, to $1.8 billion. The operating
margin benefitedfor the first six months of 1994 increased to 23.9 percent from 23.5
percent in the comparable period in 1993, due primarily to the benefit derived
from reductions in administrative and general expenses.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased in the second quarter and for the first quartersix months
of 1994 was even withrelative to the first quarter
of 1993. Interest expense decreased 7 percentcomparable periods in the first quarter1993, due primarily to a reductionrising
interest rates and higher average outstanding cash equivalents and marketable
securities balances. Interest expense increased in the second quarter and for
the first six months of 1994 relative to the comparable periods in 1993, due
primarily to rising interest rates and higher average outstanding balance of short-term
commercial paper borrowings.borrowings in 1994.
EQUITY INCOME
Equity income decreased $22for the second quarter totaled $57 million, compared to $39
million in the second quarter of 1993. The increase was due primarily to
increased earnings from Coca-Cola Enterprises and Coca-Cola & Schweppes
Beverages. For the first quartersix months of 1994 equity income totaled $64 million,
compared to $68 million for the same period in 1993. The decrease was due
primarily to lower earnings from Coca-Cola Amatil Limited partially offset by
increased earnings from Coca-Cola Enterprises and The Coca-Cola Bottling Company
of New York, Inc.& Schweppes
Beverages.
INCOME TAXES
The Company's effective tax rate increased from 30.8 percent induring the firstsecond quarter of 19931994, when
compared to the second quarter of the prior year, increased to 31.5 percent
in the first quarter of 1994.from 30.8 percent. The increase reflects the impact of the increase in the
Corporate tax rate due to the change in the U.S. tax law and a reduction in the
Company's favorable U.S. tax treatment from manufacturing facilities in Puerto
Rico.
TRANSITION EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
As mentioned in Note A, the Company retroactively adopted SFAS 112,
Employers' Accounting for Postemployment Benefits, as of January 1, 1993. SFAS
112 requires employers to accrue the costs of benefits to former or inactive
employees after employment, but before retirement. In the first quarter of
1993 the Company recorded an accumulated obligation of $12 million, which is
net of deferred taxes of $8 million.
-14-
RESULTS OF OPERATIONS (CONTINUED)
NET INCOME
Net income per share increased at a slightly higher rate than net income due
to the Company's share repurchase program.
FINANCIAL CONDITION
NET CASH FLOW PROVIDED BY OPERATIONS AFTER REINVESTMENT
In the first quartersix months of 1994, net cash flow after reinvestment was $78totaled
$705 million, a decrease of $36 million from29 percent increase over the comparable period in 1993. Net
cash provided by operating activities increased significantly in 1994 due primarily to higher
net income.income and increased dividends from equity method investments.
Reinvestment in the form of property, plant and equipment, the primary use of
cash for investing activities, was $185$364 million for the first threesix months of
1994.
The increase in trade accounts receivable, prepaid expenses, accounts payable
and accrued expenses was due primarily to seasonal factors in the soft drink
business. The increase in current marketable securities and other assets is due in part to the
Company's adoption of SFAS 115 and additional investments in securities
purchased in accordance with the negotiated tax exemption grant for the
Company's manufacturing facilities in Puerto Rico and the Company's adoption of SFAS 115.
-14-
FINANCIAL CONDITION (CONTINUED)Rico.
FINANCING
Financing activities primarily represent the Company's net borrowing
activities, dividend payments and share repurchases. Cash used in financing
activities totaled $119$499 million and $286for the first six months of 1994, a 12 percent
decrease from the comparable period of the prior year. Net borrowings were
$332 million in the first quarterssix months of 1994, and 1993, respectively. The change between quarters was due primarilycompared to a
reduction$169 million in payments of debt during the
first quartersix months of 1994.1993. Net borrowings
for the first quarter of 1994 were used primarily to finance acceleratedshare
repurchases. Cash used for share repurchases and investment activity.decreased to $402 million,
compared to $436 million in the comparable period in 1993. Cash dividends
increased due to the increase in dividends per share to $.39 per share for the
first six months of 1994, compared to $.34 per share for the comparable period
in 1993.
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 1 percent stronger induring the first quartersix months of
1994 versus key hard currencies for the comparable period of the prior year.
-15-
Part II. Other Information
Item 4. Submissions of Matters to a Vote of Security Holders
The Annual Meeting of Share Owners was held on Wednesday, April 20, 1994, in
Wilmington, Delaware, at which 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 1997 were as follows:
FOR WITHHELD
------------- ---------
Ronald W. Allen 1,127,983,805 6,205,184
Donald F. McHenry 1,127,600,466 6,588,523
Paul F. Oreffice 1,127,898,497 6,290,492
James B. Williams 1,127,995,953 6,193,036
Additional Directors, whose terms of office as Directors continued after
the meeting, are as follows:
Term expiring in 1995 Term expiring in 1996
--------------------- ---------------------
Herbert A. Allen Cathleen P. Black
Charles W. Duncan, Jr. Warren E. Buffett
Roberto C. Goizueta Susan B. King
James D. Robinson, III William B. Turner
Peter V. Ueberroth
(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
------------- ---------- --------- ---------
Proposal to approve the
Long Term Performance
Incentive Plan of The
Coca-Cola Company, as
amended 1,057,806,554 66,978,796 9,403,639 0
Proposal to approve the
Executive Performance
Incentive Plan of The
Coca-Cola Company 1,047,640,495 75,738,027 10,810,467 0
Ratification of the
appointment of Ernst &
Young as independent
auditors of the Company
to serve for the 1994
fiscal year 1,128,048,474 2,681,586 3,458,929 0
-16-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
103 - Letter Agreement Dated May 3, 1994, BetweenBylaws of the Company and
Mr. Sergio S. ZymanRegistrant As in Effect Since April 15, 1993
12 - Computation of Ratios of Earnings to Fixed Charges
(b) Reports on Form 8-K:
ANo report on Form 8-K washas been filed on January 27, 1994,during the quarter for which
included
restated condensed consolidated financial statements (unaudited) of
The Coca-Cola Company and subsidiaries (i) for the three months
ended March 31, 1993, (ii) for the three and six months ended June
30, 1993, and (iii) for the three and nine months ended September
30, 1993. Such financial statements were restated to reflect the
retroactive adoption by The Coca-Cola Company of Statement of
Financial Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits, as of January 1, 1993.this report is filed.
-17--16-
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 6,August 10, 1994 By: /s/ James E. Chestnut
-------------------------------------
James E. ChestnutGary P. Fayard
--------------------------
Gary P. Fayard
Vice President and Controller
(On behalf of the Registrant and
as Chief Accounting Officer)
-18-
EXHIBIT INDEX
Exhibit Number and Description
103 - Letter Agreement Dated May 3, 1994, BetweenBylaws of the Company and
Mr. Sergio S. ZymanRegistrant As in Effect Since April 15, 1993
12 - Computation of Ratios of Earnings to Fixed Charges