EXHIBIT 13.1
FINANCIAL REVIEW-THE COCA-COLA COMPANY AND SUBSIDIARIES
-------------------------------------------------------
FINANCIAL REVIEW INCORPORATING
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's primary objective is to maximize share-owner value over
time. To accomplish this objective, The Coca-Cola Company and
subsidiaries (the Company) have developed a comprehensive business
strategy that emphasizes maximizing long-term cash flows, consistently
improving Economic Profit and creating Economic Value Added. This
strategy focuses on continuing aggressive investment in the high-
return soft drink business, increasing returns on existing investments
and optimizing the cost of capital through appropriate financial
policies. The success of this strategy is evidenced by growth in the
Company's volume, cash flows, earnings and economic profit, its
increased returns on total capital and equity, and the total return to
its share owners over time.
INVESTMENTS
With a pervasive global business system that distributes its products
in more than 195 countries, the Company is well positioned to
capitalize on new investment opportunities as they arise. Within the
last several years, the Company has gained entry into Romania, as well
as re-entry into several countries, including Vietnam, South Africa
and India. The Company also continues to expand its business system
rapidly across emerging markets such as China, East Central Europe and
Indonesia.
Management seeks investments that strategically enhance existing
operations and offer cash returns that exceed the Company's long-term
after-tax weighted average cost of capital, estimated by management to
be approximately 11 percent. The Company's soft drink business
consistently generates high returns on capital, providing an
attractive area for continued investment. With international per
capita consumption of Company products at only 11 percent of the U.S.
level, attractive investment opportunities exist in many international
markets for the Company and its bottlers to expand production and
distribution systems. In highly developed soft drink markets,
additional high-return investments are made to increase product
selection and availability, enhance product appeal and improve overall
efficiency. The Company continues to benefit from the consolidation of
production and distribution networks and investment in the latest
technology and information systems.
Capital expenditures on property, plant and equipment and the
percentage distribution by geographic area for 1994, 1993 and 1992 are
as follows (dollars in millions):
Year Ended December 31, 1994 1993 1992
- ---------------------------------------------------------
Capital expenditures $878 $800 $1,083
- ---------------------------------------------------------
United States 32% 23% 22%
Africa 3% 1% 1%
European Community 26% 33% 41%
Latin America 16% 19% 20%
Northeast Europe/
Middle East 19% 18% 13%
Pacific & Canada 4% 6% 3%
=========================================================
In addition to capital expenditures, the Company has made
significant investments in bottling operations over the last decade,
ensuring strong and efficient production, distribution and marketing
systems and maximizing long-term growth in volume, cash flows and
share-owner value of the Company and the bottler system.
When appropriate, the Company makes equity investments in
bottling companies. Through these investments, the Company is able to
help focus and improve sales and marketing programs, assist in the
development of effective business and information systems and help
establish capital structures appropriate for these respective
operations. During 1994, a joint venture known as the Coca-Cola
Bottling Companies of Egypt was formed following the privatization of
the Egyptian public sector bottler. In 1993, the Company purchased a
30 percent interest in Coca-Cola FEMSA, S.A. de C.V. (Coca-Cola FEMSA)
to assist in further strengthening strategic bottling territories in
Latin America. Also in 1993, the Company purchased shares constituting
a 10 percent voting interest in Panamerican Beverages, Inc., which
owns bottling operations in Mexico, Brazil and Colombia.
In restructuring the bottling system, the Company occasionally
purchases temporary majority interests in companies. The length of
ownership is influenced by various factors, including operational
changes, management changes and the process of identifying appropriate
new investors/operators. These investments are generally accounted for
by the equity method and relate primarily to temporary majority
interests that management intends to reduce to below 50 percent. For
example, the Company reduced its voting interest in Coca-Cola Amatil
Limited (Coca-Cola Amatil) in early 1995 and in The Coca-Cola Bottling
Company of New York, Inc. in January 1994 to below 50 percent,
consistent with its stated intention of ending temporary control after
completing certain organizational changes.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
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FINANCIAL REVIEW INCORPORATING
MANAGEMENT'S DISCUSSION AND ANALYSIS
In certain situations, owning a controlling interest in bottling
operations is advantageous, compensating for limited local resources
or facilitating improvements in customer relationships.
As the process of restructuring majority-owned bottlers is
completed, the Company will consider selling its majority interests to
other companies within the Company's bottling system or selling shares
of those bottlers to the public. In 1994, the Company sold a
controlling 51 percent interest in the previously wholly owned bottler
in Argentina, Coca-Cola S.A. Industrial, Comercial y Financiera, to
Coca-Cola FEMSA.
The following table illustrates the excess of the calculated fair
values, based on quoted closing prices of publicly traded shares, over
the Company's carrying values for selected equity method investees (in
millions):
Carrying Fair
December 31, Value Value Excess
- ---------------------------------------------------------------------
1994
Coca-Cola Amatil Limited $ 694 $ 1,230 $ 536
Coca-Cola Enterprises Inc. 524 1,014 490
Coca-Cola FEMSA, S.A. de C.V. 187 351 164
Coca-Cola Beverages Ltd. 10 60 50
Coca-Cola Bottling Co. Consolidated 85 73 (12)
- ---------------------------------------------------------------------
$ 1,228
- ---------------------------------------------------------------------
In 1994, consolidated bottling and fountain operations produced
and distributed approximately 16 percent of the Company's worldwide
unit case volume. Cost and equity investee bottlers produced and
distributed an additional 36 percent of the Company's worldwide unit
case volume.
INCREASING RETURNS
The Company manages its concentrate and bottling operations to
increase volume and its share of worldwide soft drink sales, while at
the same time optimizing profit margins. The Company also provides
expertise and resources to its equity investees to strengthen their
businesses and to build long-term volume, cash flows and share-owner
value.
By controlling costs through more efficient purchasing,
manufacturing and distribution processes, allocating marketing
resources efficiently and implementing price increases generally in
line with local inflation, the Company was able to improve operating
margins in 1994.
Expanding the worldwide availability of Company products,
increasing per capita consumption of soft drinks and advancing the
Company's share of industry sales drive the success of the Company's
global investments. In new and emerging markets, the Company's primary
emphasis is on raising per capita consumption levels by expanding
availability of the Company's products. In these new and emerging
markets, major investments are made in the basic infrastructure of the
system: facilities, distribution networks and sales equipment. These
investments are made by acquiring or forming strategic business
alliances with local bottlers, matching local expertise with the
Company's focus and experience. Point-of-sale merchandising and
product sampling are used to establish consumer awareness and build
product acceptability. The Company increases consumer awareness and
the appeal of its products by using integrated marketing programs,
including advertising, to build consumer affinity for the Company's
trademarks. Advertising expenditures were $1,308 million in 1994,
$1,126 million in 1993 and $1,107 million in 1992.
In leading-edge markets, growth is driven, in part, by providing
the consumer with new products and additional serving sizes.
The Company's ownership of and investments in bottling operations
also help increase volume and profits. While the bottling business
generally provides lower margins on revenue compared to the
concentrate business, the Company's consolidated operations continue
to increase profits on a per-gallon basis. In addition, the Company's
aggressive investment in bottling infrastructure has resulted in
profit growth and enhanced sales and unit case volume at the bottler
level, which in turn generates increased gallon shipments for the
concentrate business.
Equity income, which primarily represents returns from the
Company's unconsolidated bottling investments, reached $134 million in
1994.
FINANCIAL POLICIES
To maximize share-owner value, the Company optimizes its cost of
capital through appropriate financial policies.
DEBT FINANCING
The Company maintains debt levels considered prudent based on its cash
flow, interest coverage and percentage of debt to total capital. The
Company lowers its overall cost of capital through the use of debt
financing which increases the return on share-owners' equity.
The Company's capital structure and financial policies have
earned long-term credit ratings of "AA" from Standard & Poor's and
"Aa3" from Moody's, as well as the highest credit ratings available
for the Company's commercial paper programs.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
FINANCIAL REVIEW INCORPORATING
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL RISK MANAGEMENT
The Company employs the use of derivative financial instruments for
the purpose of reducing exposure to financial risks.
With approximately 79 percent of operating income in 1994
generated by operations outside the United States, the Company
benefits from operating in a variety of currencies, as weakness in any
particular currency is often offset by strengths in other currencies.
Most foreign currency exposures are managed on a consolidated
basis, allowing the Company to net certain exposures and thus take
advantage of any natural offsets. Forward exchange contracts are used
to adjust the currency mix of recorded assets and liabilities, further
reducing the exposure from adverse fluctuations in exchange rates. The
Company also enters into forward exchange contracts and swaps and
purchases options to hedge both firmly committed and anticipated but
not yet firmly committed transactions, and net investments in certain
international operations.
The Company uses only liquid spot, forward, option and swap
contracts. It does not enter into leveraged, structured or illiquid
contracts. Additionally, the Company does not enter into derivative
financial instruments for trading purposes. As a matter of policy, all
derivative positions are used to hedge underlying economic exposures
by mitigating the risk of changes in currency, interest rate and other
market risks on a matched basis. Any gains or losses on hedging
transactions are generally offset by gains or losses on the underlying
exposures being hedged.
SHARE REPURCHASES
In July 1992, the Board of Directors authorized a plan to repurchase
up to 100 million shares of the Company's common stock through the
year 2000. In 1994, the Company repurchased 25 million shares under
this plan at a total cost of approximately $1.2 billion. From the
inception of share repurchase programs in 1984 to December 31, 1994,
the Company has repurchased 454 million shares at an average price per
share of $15.45.
DIVIDEND POLICY
Strong earnings growth has enabled the Company to increase the cash
dividend per common share by an average annual compound growth rate of
13 percent since December 31, 1984. The annual common stock dividend
was $.78 per share, $.68 per share and $.56 per share in 1994, 1993
and 1992, respectively. At its February 1995 meeting, the Board of
Directors increased the quarterly dividend per common share to $.22,
equivalent to a full-year common dividend of $.88 in 1995, the 33rd
consecutive annual increase.
The Board of Directors has maintained a common stock dividend
payout ratio of approximately 40 percent of net income, including the
1994 dividend payout ratio.
MEASURING PERFORMANCE
Economic Profit and Economic Value Added provide a direct framework
for measuring the impact of value-oriented actions. Economic Profit is
defined as net operating profit after taxes in excess of a computed
capital charge for average operating capital employed. Economic Value
Added represents the growth in Economic Profit from year to year.
Beginning in 1994, the Company expanded the use of Economic Value
Added as a performance measurement tool. Measured over a three year
time frame, long-term incentive bonuses for certain employees of the
Company are now determined, in part, by comparison against Economic
Profit target levels. This change in performance measures was made to
more closely align management's focus on the key drivers of the
business. Management believes that a clear focus on the components of
Economic Profit, and the resultant growth in Economic Value Added over
time, leads to the creation of share-owner wealth.
Over the last 13 years, the Company has increased its Economic
Profit at an average annual compound rate of 26 percent, resulting in
Economic Value Added to the Company of $1.9 billion. Over the same
period, the Company's stock price has increased at an average annual
compound rate of 25 percent.
TOTAL RETURN TO SHARE OWNERS
During the past decade, share owners of the Company have received an
excellent return on their investment. A $100 investment in the
Company's common stock at December 31, 1984, together with reinvested
dividends, would be worth approximately $1,237 at December 31, 1994,
an average annual compound return of 29 percent.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
FINANCIAL REVIEW INCORPORATING
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
LINES OF BUSINESS
SOFT DRINKS
The Company is the largest manufacturer, marketer and distributor of
soft drink concentrates and syrups in the world. It manufactures soft
drink concentrates and syrups, which it sells to bottling and canning
operations, and manufactures fountain soft drink syrups, which it
sells to authorized fountain wholesalers and some fountain retailers.
The Company has substantial equity investments in numerous soft drink
bottling and canning operations, and it owns and operates certain
bottling and canning operations outside the United States.
FOODS
The foods business sector's principal business is processing and
marketing juice and juice-drink products. It is the largest marketer
of juice and juice-drink products in the world. During 1994,
management responsibility for the Minute Maid Juices To Go and
Fruitopia product lines was transferred from the foods business sector
to the United States and international soft drinks business. Prior
years' net operating revenues and operating income have been
reclassified to conform to the current year presentation.
VOLUME
SOFT DRINKS
The Company measures soft drink volume in two ways: gallon shipments
of concentrates and syrups and equivalent unit cases of finished
product. Gallon shipments represent the primary business of the
Company, since they measure concentrates and syrups sold by the
Company to its bottling system. Most of the Company's revenues are
based on this measure of "wholesale" activity. The Company also
monitors unit case volume, a measure of finished product sold by the
bottling system to retail customers, who make sales to consumers.
Management believes unit case volume more accurately measures the
underlying strength of the global business system because it measures
trends at the retail level and is less impacted by inventory
management practices at the wholesale level. Fountain syrups sold by
the Company directly to customers are included in both measures
simultaneously.
OPERATIONS
NET OPERATING REVENUES AND GROSS MARGIN
Revenues for the Company's soft drink business increased 18 percent in
1994, primarily due to increased gallon shipments, selected price
increases, continued expansion of the Company's bottling and canning
operations and a weaker U.S. dollar versus key hard currencies.
Revenues for the foods business sector in 1994 increased 3 percent,
primarily due to price increases for orange juice products.
In 1993, revenues for the Company's soft drink business increased
8 percent, reflecting an increase in gallon shipments and continued
expansion of bottling and canning operations, partially offset by the
adverse effect of a stronger U.S. dollar versus most key hard
currencies. Revenues for the foods business sector were even in 1993,
as volume increases offset price reductions.
On a consolidated basis, the Company's worldwide net revenues
grew 16 percent in 1994, while gross profit grew 14 percent. The
Company's gross margin contracted to 62 percent in 1994 from 63
percent in 1993, primarily due to the acquisition of bottling and
canning operations, which typically have lower gross profit to net
revenue relationships, but offer strong cash flows.
On a consolidated basis, gross profits grew 10 percent in 1993 on
net revenue growth of 7 percent. The Company's gross margin expanded
to 63 percent in 1993 from 61 percent in 1992 due to lower costs for
materials such as aspartame and orange solids.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling expenses were $4,931 million in 1994, $4,360 million in 1993
and $4,006 million in 1992. The increase in 1994 and 1993 was
primarily due to higher marketing investments in support of the
Company's volume growth.
Administrative and general expenses were $1,366 million in 1994,
$1,335 million in 1993 and $1,243 million in 1992. The increase in
1994 and 1993 was due primarily to expansion of the business,
particularly newly formed, Company-owned bottling operations. Also,
administrative and general expenses in 1993 included provisions of $63
million related to increasing efficiencies in European, domestic and
corporate operations. Administrative and general expenses, as a
percentage of net operating revenues, were approximately 8 percent in
1994 and 10 percent in 1993 and 1992.
OPERATING INCOME AND OPERATING MARGIN
Operating income grew 20 percent in 1994, after increasing 12 percent
in 1993. Operating margins grew to 23 percent in 1994 from 22 percent
in 1993. The expansion in operating margins is attributable to revenue
growth outpacing moderate growth in selling, administrative and
general expenses.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
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FINANCIAL REVIEW INCORPORATING
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARGIN ANALYSIS
[bar chart]
Year Ended December 31, 1992 1993 1994
- -------------------------------------------------------------------------
Net Operating Revenues (In billions) $13.1 $14.0 $16.2
Gross Margin 61% 63% 62%
Operating Margin 21% 22% 23%
=========================================================================
The Company's gross profit and operating income have increased due to
growth in revenues and expansion of operating margins.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased 26 percent in 1994 due primarily to rising
interest rates and higher average investments in cash equivalents and
marketable securities. Interest expense increased 18 percent in 1994
as a result of rising interest rates.
In 1993, interest expense was approximately even with the prior
year while interest income decreased 12 percent.
EQUITY INCOME
Equity income increased 47 percent to $134 million in 1994 due
primarily to increased earnings from Coca-Cola Enterprises and
Coca-Cola & Schweppes Beverages Ltd. and improved results from
Coca-Cola Beverages Ltd.
Equity income increased 40 percent to $91 million in 1993 due
primarily to new bottling investments and improved results at
Coca-Cola Amatil and Coca-Cola Nestle Refreshments, offset by the
results at Coca-Cola Beverages Ltd.
OTHER INCOME (DEDUCTIONS)-NET
In 1994, other income (deductions)-net decreased $100 million,
primarily due to recognition in 1993 of approximately $84 million of
pretax gains on sales of real estate and bottling investments
(described below). No transactions resulting in significant gains
occurred in 1994.
In 1993, other income (deductions)-net increased $86 million,
primarily due to gains on sales of certain real estate and bottling
investments. This includes a $50 million pretax gain recognized on the
sale of citrus groves in the United States, and a $34 million pretax
gain recognized on the sale of property no longer required as a result
of a consolidation of manufacturing operations in Japan.
GAIN ON ISSUANCE OF STOCK BY COCA-COLA AMATIL
In the fourth quarter of 1993, Coca-Cola Amatil purchased a bottling
operation in Indonesia by issuing approximately 8 million shares of
common stock, resulting in a noncash pretax gain of $12 million for
the Company.
INCOME TAXES
The Company's effective tax rates of 31.5 percent in 1994, 31.3
percent in 1993 and 31.4 percent in 1992 reflect the tax benefit
derived from having significant operations outside the United States
that are taxed at rates lower than the U.S. statutory rate of 35
percent.
TRANSITION EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
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, resulting in an after-
tax increase to share-owners' equity of $60 million, with no effect on
net income. SFAS 115 changes the method of accounting for certain debt
and marketable equity securities from a historical cost basis to a
fair value approach.
As of January 1, 1993, the Company recognized an after-tax charge
of $12 million resulting from the adoption of Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS 112). The cumulative charge consists
primarily of health benefits for surviving spouses and disabled
employees.
As of January 1, 1992, the Company recognized an after-tax charge
of $219 million resulting from the adoption of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106). The
cumulative charge consists of postretirement health care and life
insurance benefit obligations to employees of the Company and the
Company's portion of postretirement benefit obligations of its equity
investees. The Company elected to absorb this charge immediately
rather than amortize the obligation over a period of up to 20 years.
INCOME PER SHARE
Accelerated by the Company's share repurchase program, income per
share before changes in accounting principles grew 18 percent and 17
percent in 1994 and 1993, respectively. Net income per share grew 19
percent in 1994.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
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FINANCIAL REVIEW INCORPORATING
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The ability to generate cash from operations in excess of requirements
for capital reinvestment and dividends remains one of the Company's
significant financial strengths. The Company anticipates that its
operating activities in 1995 will continue to provide sufficient cash
flows to meet all financial commitments and to capitalize on
opportunities for business expansion.
FREE CASH FLOW
Free Cash Flow, which represents the cash remaining from operations
after the Company has satisfied its business reinvestment
opportunities, increased by 32 percent to $2.1 billion in 1994.
Management focuses on growing Free Cash Flow to achieve the Company's
primary objective, maximizing share-owner value. The Company uses Free
Cash Flow, along with borrowings, to pay dividends and make share
repurchases. The consolidated statements of cash flows are summarized
as follows (in millions):
Year Ended December 31, 1994 1993 1992
- ----------------------------------------------------------
Cash flows provided by
(used in):
Operations $ 3,183 $ 2,508 $ 2,232
Investment activities (1,037) (885) (1,359)
- ----------------------------------------------------------
Free Cash Flow 2,146 1,623 873
Cash flows provided by
(used in):
Financing (1,792) (1,540) (917)
Exchange 34 (41) (58)
- ----------------------------------------------------------
Increase (decrease) in cash $ 388 $ 42 $ (102)
==========================================================
Cash provided by operations continued to grow in 1994, reaching
$3.2 billion, resulting from growth in net income before noncash
charges for depreciation and amortization and increased dividends from
equity method investments. In 1993, cash from operations totaled $2.5
billion, a 12 percent increase over 1992, resulting primarily from
growth in net income.
The Company continued to invest extensively in Eastern Europe,
the Middle East and Southeast Asia in 1994. Continued investment,
principally in bottling companies, along with equity income, net of
dividends received, contributed to an overall increase in the carrying
value of the Company's equity method investments in 1994 and 1993.
Cash used for acquisitions and investments, principally in bottling
companies, declined by $300 million in 1994. However, this decline was
more than offset by a reduction in proceeds from disposals of
property, plant and equipment and investments and other assets,
resulting in an overall increase in net cash used in investing
activities of 17 percent.
A decline in purchases of securities and property, plant and
equipment, coupled with the receipt of proceeds on the sales of real
estate in Japan and the United States and various bottling
investments, resulted in a net decrease in cash used in investment
activities in 1993.
The Company's finance subsidiary made additional borrowings in
1994 and 1993 to fund increased receivables. The increase in 1994 in
marketable securities and the carrying value of cost method
investments is due in part to the Company's adoption of SFAS 115,
which reflects a noncash adjustment to fair value. A portion of the
increase in marketable securities and other assets in 1994, as well as
the majority of the increase in 1993, was attributable to an increase
in securities held in accordance with a negotiated income tax
exemption grant for the Company's manufacturing facilities in Puerto
Rico. The balance also increased due to deferred tax assets generated
in 1994 and 1993.
Timing of tax payments, including those attributable to the sales
of real estate, resulted in an increase in accrued taxes of 33 percent
in 1993.
FINANCING ACTIVITIES
Financing activities primarily represent the Company's net borrowing
activities, dividend payments and share repurchases. Net cash used in
financing activities totaled $1.8 billion in 1994, $1.5 billion in
1993 and $917 million in 1992. The change between years was due, in
part, to net borrowings of debt in 1994 and 1992, compared to net
reductions of debt in 1993. Cash used to purchase common stock for
treasury increased to $1.2 billion in 1994, from $680 million in 1993.
The Company's reputation, global presence and strong capital
position afford it access to key financial markets around the world,
enabling the Company to raise funds with a low effective cost. This
posture, coupled with the Company's aggressive management of its mix
of short-term versus long-term debt, results in a lower overall cost
of borrowing. The Company's debt management policies, in association
with the share repurchase program and investment activity, typically
result in current liabilities exceeding current assets.
The Company manages its debt levels based on the following
financial measurements and ratios:
Year Ended December 31, 1994 1993 1992
- -----------------------------------------------------------
Net debt (in billions) $ 1.5 $ 1.6 $ 1.8
Net debt to net capital 23% 26% 32%
Free cash flow to net debt 141% 100% 48%
Interest coverage 19x 18x 16x
Ratio of earnings to
fixed charges 16.8x 15.7x 14.1x
===========================================================
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THE COCA-COLA COMPANY AND SUBSIDIARIES
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FINANCIAL REVIEW INCORPORATING
MANAGEMENT'S DISCUSSION AND ANALYSIS
Debt levels are measured excluding the debt of the Company's
finance subsidiary, and are net of cash, cash equivalents and
marketable securities in excess of operating requirements and net of
temporary bottling investments.
Commercial paper is the Company's primary source of short-term
financing. At December 31, 1994, the Company had $2.8 billion in lines
of credit and other short-term credit facilities available, under
which $2.0 billion was outstanding. Included was $1.8 billion
outstanding in commercial paper borrowings. The 1994 increase in loans
and notes payable is primarily attributable to additional commercial
paper borrowings resulting from the Company's management of its mix of
short and long-term debt.
EXCHANGE
International operations are subject to certain opportunities and
risks, including currency fluctuations and government actions. The
Company closely monitors its methods of operating in each country and
adopts strategies responsive to changing economic and political
environments, providing flexibility to take advantage of changing
foreign currencies and interest rates.
The Company uses approximately 49 functional currencies. In 1994,
1993 and 1992, the weighted average exchange rates for certain key
foreign currencies that are traded on exchange markets strengthened
(weakened) against the U.S. dollar as follows:
Year Ended December 31, 1994 1993 1992
- --------------------------------------------------------
Key market-traded currencies 3 % (3)% 5 %
Australian dollar 9 % (7)% (5)%
British pound 2 % (15)% 1 %
Canadian dollar (5)% (8)% (4)%
French franc (1)% (3)% 9 %
German mark 2 % (5)% 8 %
Japanese yen 9 % 15 % 6 %
========================================================
The change in the foreign currency translation adjustment in 1994
was due primarily to the weakening of the U.S. dollar against certain
key currencies. Exchange losses recorded in other income (deductions)-
net amounted to $25 million in 1994, $74 million in 1993 and $25
million in 1992. Exchange losses include the remeasurement of certain
currencies into functional currencies and the costs of hedging certain
transaction and balance sheet exposures.
Additional information concerning the Company's hedging
activities is presented on pages 55 through 57.
IMPACT OF INFLATION AND CHANGING PRICES
Inflation is a factor in many markets around the world and
consequently impacts the way the Company operates. In general, the
Company is able to increase prices to counteract the effects of
increasing costs and generate sufficient cash flows to maintain its
productive capability.
OUTLOOK
By operating in a global business environment whereby the majority of
the Company's operating income is generated by operations outside the
United States, the Company benefits from operating in a variety of
currencies, as currency devaluations and economic weakness in any
particular region are often offset by strengths in other currencies
and regional economies. Additionally, management of the Company has
various operational initiatives available to offset the unfavorable
impact of such events.
Although future economic events cannot be predicted with accuracy
and recessionary conditions in certain markets may present
uncertainties, management believes continued expansion into the
developing population centers of the world presents further
opportunity for growth. The strength of the Company's brands, its
broad global presence in both developed and developing markets, and
its strong financial condition, allow the Company the flexibility to
take advantage of growth opportunities and to continue to increase
share-owner value.
ADDITIONAL INFORMATION
For additional information concerning the Company's operations, cash
flows, liquidity and capital resources, this analysis should be read
in conjunction with the information on pages 46 through 66 of this
report. Additional information concerning operations in different lines
of business and geographic areas is presented on pages 63 and 64.
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THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
SELECTED FINANCIAL DATA
Compound Growth Rates Year Ended December 31,
----------------------- ------------------------
(In millions except per share data, ratios and growth rates) 5 Years 10 Years 1994(2) 1993(3)
- ----------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Net operating revenues 13.4% 11.5% $ 16,172 $ 13,957
Cost of goods sold 11.7% 8.5% 6,167 5,160
- ----------------------------------------------------------------------------------------------------------------
Gross profit 14.5% 14.0% 10,005 8,797
Selling, administrative and general expenses 13.5% 13.0% 6,297 5,695
- ----------------------------------------------------------------------------------------------------------------
Operating income 16.5% 15.9% 3,708 3,102
Interest income 181 144
Interest expense 199 168
Equity income 134 91
Other income (deductions)-net (96) 4
Gain on issuance of stock by equity investees -- 12
- ----------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes
and changes in accounting principles 16.1% 15.2% 3,728 3,185
Income taxes 16.2% 12.5% 1,174 997
- ----------------------------------------------------------------------------------------------------------------
Income from continuing operations before changes
in accounting principles 16.1% 16.6% $ 2,554 $ 2,188
================================================================================================================
Net income 10.7%(6) 15.0% $ 2,554 $ 2,176
Preferred stock dividends -- --
- ----------------------------------------------------------------------------------------------------------------
Net income available to common share owners 11.0%(6) 15.0% $ 2,554 $ 2,176
================================================================================================================
Average common shares outstanding 1,290 1,302
PER COMMON SHARE DATA
Income from continuing operations before changes
in accounting principles 18.1% 18.9% $ 1.98 $ 1.68
Net income 12.5% 17.3% 1.98 1.67
Cash dividends 18.1% 13.0% .78 .68
Market price at December 31 21.7% 25.8% 51.50 44.63
BALANCE SHEET DATA
Cash, cash equivalents and current marketable securities $ 1,531 $ 1,078
Property, plant and equipment-net 4,080 3,729
Depreciation 382 333
Capital expenditures 878 800
Total assets 13,873 12,021
Long-term debt 1,426 1,428
Total debt 3,509 3,100
Share-owners' equity 5,235 4,584
Total capital(1) 8,744 7,684
OTHER KEY FINANCIAL MEASURES(1)
Total-debt-to-total-capital 40.1% 40.3%
Net-debt-to-net-capital 22.6% 26.2%
Return on common equity 52.0% 51.7%
Return on capital 32.7% 31.2%
Dividend payout ratio 39.4% 40.6%
Economic profit $ 2,012 $ 1,495
================================================================================================================
(1)See Glossary on page 70.
Following are the above-referenced definitions extracted from page 70:
GLOSSARY OF TERMS
DIVIDEND PAYOUT RATIO: Calculated by dividing cash dividends on common stock by net income available to
common share owners.
ECONOMIC PROFIT: Represents net operating profit after taxes in excess of a computed capital charge for
average operating capital employed.
NET DEBT AND NET CAPITAL: Debt and capital in excess of cash, cash equivalents and marketable securities
not required for operations and temporary bottling investments. The net-debt-to-net-capital ratio excludes
debt and excess cash of the Company's finance subsidiary.
RETURN ON CAPITAL: Calculated by dividing income from continuing operations before changes in accounting
principles less tax-adjusted interest expense by average total capital.
RETURN ON COMMON EQUITY: Calculated by dividing income from continuing operations before changes in
accounting principles less preferred stock dividends by average common share-owners' equity.
TOTAL CAPITAL: Equals share-owners' equity plus interest-bearing debt.
(2)In 1994, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
(3)In 1993, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
(4)In 1992, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
(5)The Company adopted SFAS No. 109, "Accounting for Income Taxes," in 1992 by restating financial statements
beginning in 1989.
-44-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
- ---------------------------------------------------------------------------------------------------------
1992(4,5) 1991(5) 1990(5) 1989(5) 1988 1987 1986 1985 1984
- ---------------------------------------------------------------------------------------------------------
$ 13,074 $ 11,572 $ 10,236 $ 8,622 $ 8,065 $ 7,658 $ 6,977 $ 5,879 $ 5,442
5,055 4,649 4,208 3,548 3,429 3,633 3,454 2,909 2,738
- ---------------------------------------------------------------------------------------------------------
8,019 6,923 6,028 5,074 4,636 4,025 3,523 2,970 2,704
5,249 4,604 4,076 3,348 3,038 2,701 2,626 2,163 1,855
- ---------------------------------------------------------------------------------------------------------
2,770 2,319 1,952 1,726 1,598 1,324 897 807 849
164 175 170 205 199 232 154 151 133
171 192 231 308 230 297 208 196 128
65 40 110 75 92 64 45 52 42
(82) 41 13 66 (33) -- 35 69 13
-- -- -- -- -- 40 375 -- --
- ---------------------------------------------------------------------------------------------------------
2,746 2,383 2,014 1,764 1,626 1,363 1,298 883 909
863 765 632 553 537 496 471 314 360
- ---------------------------------------------------------------------------------------------------------
$ 1,883 $ 1,618 $ 1,382 $ 1,211 $ 1,089 $ 867 $ 827 $ 569 $ 549
=========================================================================================================
$ 1,664 $ 1,618 $ 1,382 $ 1,537 $ 1,045 $ 916 $ 934 $ 722 $ 629
-- 1 18 21 7 -- -- -- --
- ---------------------------------------------------------------------------------------------------------
$ 1,664 $ 1,617 $ 1,364 $ 1,516(6) $ 1,038 $ 916 $ 934 $ 722 $ 629
=========================================================================================================
1,317 1,333 1,337 1,384 1,458 1,509 1,547 1,573 1,587
$ 1.43 $ 1.21 $ 1.02 $ .86 $ .74 $ .57 $ .53 $ .36 $ .35
1.26 1.21 1.02 1.10(6) .71 .61 .60 .46 .40
.56 .48 .40 .34 .30 .28 .26 .25 .23
41.88 40.13 23.25 19.31 11.16 9.53 9.44 7.04 5.20
$ 1,063 $ 1,117 $ 1,492 $ 1,182 $ 1,231 $ 1,489 $ 895 $ 843 $ 768
3,526 2,890 2,386 2,021 1,759 1,602 1,538 1,483 1,284
310 254 236 181 167 152 151 130 119
1,083 792 593 462 387 304 346 412 300
11,052 10,189 9,245 8,249 7,451 8,606 7,675 6,341 5,241
1,120 985 536 549 761 909 996 801 631
3,207 2,288 2,537 1,980 2,124 2,995 1,848 1,280 1,310
3,888 4,239 3,662 3,299 3,345 3,187 3,479 2,948 2,751
7,095 6,527 6,199 5,279 5,469 6,182 5,327 4,228 4,061
45.2% 35.1% 40.9% 37.5% 38.8% 48.4% 34.7% 30.3% 32.3%
31.9% 19.2% 23.7% 14.7% 18.9% 15.4% 10.9% 15.6% 19.7%
46.4% 41.3% 41.4% 39.4% 34.7% 26.0% 25.7% 20.0% 19.4%
29.4% 27.5% 26.8% 26.5% 21.3% 18.3% 20.1% 16.8% 16.7%
44.3% 39.5% 39.2% 31.0%(6) 42.1% 46.0% 43.1% 53.8% 57.9%
$ 1,293 $ 1,029 $ 878 $ 821 $ 748 $ 417 $ 311 $ 269 $ 268
=========================================================================================================
(6)Net income available to common share owners in 1989 includes after-tax gains of $604 million ($.44
per common share) from the sales of the Company's equity interest in Columbia Pictures Entertainment,
Inc. and the Company's bottled water business and the transition effect of $265 million related to
the change in accounting for income taxes. Excluding these nonrecurring items, the dividend payout
ratio in 1989 was 39.9 percent.
-45-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED BALANCE SHEETS
December 31, 1994 1993
- ------------------------------------------------------------------------------------
(In millions except share data)
ASSETS
CURRENT
Cash and cash equivalents $ 1,386 $ 998
Marketable securities 145 80
- ------------------------------------------------------------------------------------
1,531 1,078
Trade accounts receivable, less allowances of
$33 in 1994 and $39 in 1993 1,470 1,210
Finance subsidiary receivables 55 33
Inventories 1,047 1,049
Prepaid expenses and other assets 1,102 1,064
- ------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 5,205 4,434
- ------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Equity method investments
Coca-Cola Enterprises Inc. 524 498
Coca-Cola Amatil Limited 694 592
Other, principally bottling companies 1,114 1,037
Cost method investments, principally bottling companies 178 88
Finance subsidiary receivables 255 226
Marketable securities and other assets 1,163 868
- ------------------------------------------------------------------------------------
3,928 3,309
- ------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Land 221 197
Buildings and improvements 1,814 1,616
Machinery and equipment 3,776 3,380
Containers 346 403
- ------------------------------------------------------------------------------------
6,157 5,596
Less allowances for depreciation 2,077 1,867
- ------------------------------------------------------------------------------------
4,080 3,729
- ------------------------------------------------------------------------------------
GOODWILL AND OTHER INTANGIBLE ASSETS 660 549
- ------------------------------------------------------------------------------------
$ 13,873 $ 12,021
====================================================================================
-46-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
December 31, 1994 1993
- -----------------------------------------------------------------------------------
LIABILITIES AND SHARE-OWNERS' EQUITY
CURRENT
Accounts payable and accrued expenses $ 2,564 $ 2,217
Loans and notes payable 1,757 1,409
Finance subsidiary notes payable 291 244
Current maturities of long-term debt 35 19
Accrued taxes 1,530 1,282
- ------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 6,177 5,171
- ------------------------------------------------------------------------------------
LONG-TERM DEBT 1,426 1,428
- ------------------------------------------------------------------------------------
OTHER LIABILITIES 855 725
- ------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 180 113
- ------------------------------------------------------------------------------------
SHARE-OWNERS' EQUITY
Common stock, $.25 par value
Authorized: 2,800,000,000 shares
Issued: 1,707,627,955 shares in 1994;
1,703,526,299 shares in 1993 427 426
Capital surplus 1,173 1,086
Reinvested earnings 11,006 9,458
Unearned compensation related to outstanding
restricted stock (74) (85)
Foreign currency translation adjustment (272) (420)
Unrealized gain on securities available-for-sale 48 --
- ------------------------------------------------------------------------------------
12,308 10,465
Less treasury stock, at cost (431,694,661
shares in 1994; 406,072,817 shares in 1993) 7,073 5,881
- ------------------------------------------------------------------------------------
5,235 4,584
- ------------------------------------------------------------------------------------
$ 13,873 $ 12,021
====================================================================================
See Notes to Consolidated Financial Statements.
-47-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------
(In millions except per share data)
NET OPERATING REVENUES $ 16,172 $ 13,957 $ 13,074
Cost of goods sold 6,167 5,160 5,055
- ---------------------------------------------------------------------------------------------
GROSS PROFIT 10,005 8,797 8,019
Selling, administrative and general expenses 6,297 5,695 5,249
- ---------------------------------------------------------------------------------------------
OPERATING INCOME 3,708 3,102 2,770
Interest income 181 144 164
Interest expense 199 168 171
Equity income 134 91 65
Other income (deductions)-net (96) 4 (82)
Gain on issuance of stock by Coca-Cola Amatil -- 12 --
- ---------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND
CHANGES IN ACCOUNTING PRINCIPLES 3,728 3,185 2,746
Income taxes 1,174 997 863
- ---------------------------------------------------------------------------------------------
INCOME BEFORE CHANGES IN ACCOUNTING PRINCIPLES 2,554 2,188 1,883
Transition effects of changes in accounting principles
Postemployment benefits -- (12) --
Postretirement benefits other than pensions
Consolidated operations -- -- (146)
Equity investments -- -- (73)
- ---------------------------------------------------------------------------------------------
NET INCOME $ 2,554 $ 2,176 $ 1,664
=============================================================================================
INCOME PER SHARE
Before changes in accounting principles $ 1.98 $ 1.68 $ 1.43
Transition effects of changes in accounting principles
Postemployment benefits -- (.01) --
Postretirement benefits other than pensions
Consolidated operations -- -- (.11)
Equity investments -- -- (.06)
- ---------------------------------------------------------------------------------------------
NET INCOME PER SHARE $ 1.98 $ 1.67 $ 1.26
=============================================================================================
AVERAGE SHARES OUTSTANDING 1,290 1,302 1,317
=============================================================================================
See Notes to Consolidated Financial Statements.
-48-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------
(In millions)
OPERATING ACTIVITIES
Net income $ 2,554 $ 2,176 $ 1,664
Transition effects of changes in accounting principles -- 12 219
Depreciation and amortization 411 360 322
Deferred income taxes 58 (62) (27)
Equity income, net of dividends (4) (35) (30)
Foreign currency adjustments (6) 9 24
Gains on sales of assets -- (84) --
Other noncash items 41 78 103
Net change in operating assets and liabilities 129 54 (43)
- ---------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,183 2,508 2,232
- ---------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to finance subsidiary receivables (94) (177) (54)
Collections of finance subsidiary receivables 50 44 254
Acquisitions and investments, principally
bottling companies (311) (611) (388)
Purchases of securities (758) (621) (656)
Proceeds from disposals of investments and other assets 856 1,066 522
Purchases of property, plant and equipment (878) (800) (1,083)
Proceeds from disposals of property, plant and equipment 109 312 47
Other investing activities (11) (98) (1)
- --------------------------------------------------------------------------------------------
Net cash used in investing activities (1,037) (885) (1,359)
- --------------------------------------------------------------------------------------------
Net cash provided by operations after reinvestment 2,146 1,623 873
- --------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuances of debt 491 445 1,381
Payments of debt (154) (567) (432)
Issuances of stock 69 145 131
Purchases of stock for treasury (1,192) (680) (1,259)
Dividends (1,006) (883) (738)
- --------------------------------------------------------------------------------------------
Net cash used in financing activities (1,792) (1,540) (917)
- --------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 34 (41) (58)
- --------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Net increase (decrease) during the year 388 42 (102)
Balance at beginning of year 998 956 1,058
- --------------------------------------------------------------------------------------------
Balance at end of year $ 1,386 $ 998 $ 956
============================================================================================
See Notes to Consolidated Financial Statements.
-49-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF SHARE-OWNERS' EQUITY
Number of
Common Outstanding Foreign Unrealized
Three Years Ended Shares Common Capital Reinvested Restricted Currency Gain on Treasury
December 31, 1994 Outstanding Stock Surplus Earnings Stock Translation Securities Stock
- ------------------------------------------------------------------------------------------------------------------------
(In millions except |
per share data) |
BALANCE DECEMBER 31, 1991 1,329 | $ 422 $ 640 $ 7,239 $ (115) $ (5) $ -- $ (3,942)
Stock issued to employees |
exercising stock options 9 | 2 129 -- -- -- -- --
Tax benefit from employees' |
stock option and restricted |
stock plans -- | -- 93 -- -- -- -- --
Stock issued under restricted |
stock plans, less |
amortization of $25 -- | -- 9 -- 15 -- -- --
Translation adjustments -- | -- -- -- -- (266) -- --
Purchases of stock for treasury (31)(1) | -- -- -- -- -- -- (1,259)
Net income -- | -- -- 1,664 -- -- -- --
Dividends (per share-$.56) -- | -- -- (738) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1992 1,307 | 424 871 8,165 (100) (271) -- (5,201)
Stock issued to employees |
exercising stock options 7 | 2 143 -- -- -- -- --
Tax benefit from employees' |
stock option and restricted |
stock plans -- | -- 66 -- -- -- -- --
Stock issued under restricted |
stock plans, less |
amortization of $19 -- | -- 6 -- 15 -- -- --
Translation adjustments -- | -- -- -- -- (149) -- --
Purchases of stock for |
treasury (17)(1) | -- -- -- -- -- -- (680)
Net income -- | -- -- 2,176 -- -- -- --
Dividends (per share-$.68) -- | -- -- (883) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1993 1,297 | 426 1,086 9,458 (85) (420) -- (5,881)
Transition effect of change |
in accounting for certain |
debt and marketable |
equity securities, net of |
deferred taxes -- | -- -- -- -- -- 60 --
Stock issued to employees |
exercising stock options 4 | 1 68 -- -- -- -- --
Tax benefit from employees' |
stock option and |
restricted stock plans -- | -- 17 -- -- -- -- --
Stock issued under restricted |
stock plans, less |
amortization of $13 -- | -- 2 -- 11 -- -- --
Translation adjustments -- | -- -- -- -- 148 -- --
Net change in unrealized gain |
on securities, net of |
deferred taxes -- | -- -- -- -- -- (12) --
Purchases of stock for treasury (25)(1) | -- -- -- -- -- -- (1,192)
Net income -- | -- -- 2,554 -- -- -- --
Dividends (per share-$.78) -- | -- -- (1,006) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994 1,276 | $ 427 $ 1,173 $ 11,006 $ (74) $ (272) $ 48 $ (7,073)
==========================================================================================================================
(1)Common stock purchased from employees exercising stock options amounted to 208 thousand, 2.7 million
and 1.3 million shares for the years ending December 31, 1994, 1993 and 1992, respectively.
See Notes to Consolidated Financial Statements.
-50-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The significant accounting policies and practices followed by The
Coca-Cola Company and subsidiaries (the Company) are as follows:
CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and all subsidiaries except where control is temporary or does
not rest with the Company. The Company's investments in companies in
which it has the ability to exercise significant influence over
operating and financial policies, including certain investments where
there is a temporary majority interest, are accounted for by the
equity method. Accordingly, the Company's share of the net earnings of
these companies is included in consolidated net income. The Company's
investments in other companies are carried at cost or fair value,
where appropriate. All significant intercompany accounts and
transactions are eliminated.
Certain amounts in the prior years' financial statements have
been reclassified to conform to the current year presentation.
NET INCOME PER SHARE
Net income per share is computed by dividing net income by the
weighted average number of shares outstanding.
CASH EQUIVALENTS
Marketable securities that are highly liquid and have maturities of
three months or less at the date of purchase are classified as cash
equivalents.
INVENTORIES
Inventories are valued at the lower of cost or market. In general,
cost is determined on the basis of average cost or first-in, first-out
methods. However, for certain inventories, cost is determined on the
last-in, first-out (LIFO) method. The excess of current costs over
LIFO stated values amounted to approximately $15 million and $9
million at December 31, 1994 and 1993, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreciated
principally by the straight-line method over the estimated useful
lives of the assets.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets are stated on the basis of cost
and are amortized, principally on a straight-line basis, over the
estimated future periods to be benefited (not exceeding 40 years).
Accumulated amortization was approximately $77 million and $50 million
at December 31, 1994 and 1993, respectively.
CHANGES IN ACCOUNTING PRINCIPLES
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115), was
adopted as of January 1, 1994. SFAS 115 requires that the carrying
value of certain investments be adjusted to their fair value. Upon
adoption of SFAS 115, the Company recorded an increase to share-
owners' equity of $60 million, which is net of deferred taxes of $44
million.
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" (SFAS 112), was adopted 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. Upon adoption, the Company recorded an accumulated
obligation of $12 million, which is net of deferred taxes of $8 million.
2. INVENTORIES
Inventories consist of the following (in millions):
December 31, 1994 1993
- ------------------------------------------------------------
Raw materials and supplies $ 728 $ 689
Work in process 4 4
Finished goods 315 356
- ------------------------------------------------------------
$ 1,047 $ 1,049
============================================================
-51-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. BOTTLING INVESTMENTS
COCA-COLA ENTERPRISES INC.
Coca-Cola Enterprises is the largest soft drink bottler in the world.
The Company owns approximately 44 percent of the outstanding common
stock of Coca-Cola Enterprises, and accordingly, accounts for its
investment by the equity method of accounting. A summary of financial
information for Coca-Cola Enterprises is as follows (in millions):
December 31, 1994 1993
- --------------------------------------------------------------------
Current assets $ 809 $ 746
Noncurrent assets 7,928 7,936
- --------------------------------------------------------------------
Total assets $ 8,737 $ 8,682
====================================================================
Current liabilities $ 1,088 $ 1,007
Noncurrent liabilities 6,310 6,415
- --------------------------------------------------------------------
Total liabilities $ 7,398 $ 7,422
====================================================================
Share-owners' equity $ 1,339 $ 1,260
====================================================================
Company equity investment $ 524 $ 498
====================================================================
Year Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------
Net operating revenues $ 6,011 $ 5,465 $ 5,127
Cost of goods sold 3,703 3,372 3,219
- --------------------------------------------------------------------
Gross profit $ 2,308 $ 2,093 $ 1,908
====================================================================
Operating income $ 440 $ 385 $ 306
====================================================================
Operating cash flow(1) $ 901 $ 804 $ 695
====================================================================
Income (loss) before changes
in accounting principles $ 69 $ (15) $ (15)
====================================================================
Net income (loss) available
to common share owners $ 67 $ (15) $ (186)
====================================================================
Company equity income (loss) $ 30 $ (6) $ (6)
====================================================================
(1)Excludes nonrecurring charges.
The 1992 net loss of Coca-Cola Enterprises includes $171 million
of noncash, after-tax charges resulting from the adoption of Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106) and Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109) as of January 1, 1992. The Company's financial
statements reflect the adoption of SFAS 109 by Coca-Cola Enterprises
as if it occurred on January 1, 1989.
The Company's net concentrate/syrup sales to Coca-Cola
Enterprises were $1.2 billion in 1994, $961 million in 1993 and $889
million in 1992. Coca-Cola Enterprises purchases sweeteners through
the Company under a pass-through arrangement, and accordingly, related
collections from Coca-Cola Enterprises and payments to suppliers are
not included in the Company's consolidated statements of income. These
transactions amounted to $254 million in 1994, $211 million in 1993
and $225 million in 1992. The Company also provides certain
administrative and other services to Coca-Cola Enterprises under
negotiated fee arrangements.
The Company engages in a wide range of marketing programs, media
advertising and other similar arrangements to promote the sale of
Company products in territories in which Coca-Cola Enterprises
operates. The Company's direct support for certain marketing
activities of Coca-Cola Enterprises and participation with Coca-Cola
Enterprises in cooperative advertising and other marketing programs
amounted to approximately $319 million in 1994, $256 million in 1993
and $253 million in 1992. In addition, in 1994 the Company committed
to provide approximately $34 million to Coca-Cola Enterprises under a
Company program which encourages bottlers to invest in building and
supporting soft drink infrastructure.
In January 1994, the Company sold common stock representing a 9
percent voting interest in The Coca-Cola Bottling Company of New York,
Inc. (CCNY) to Coca-Cola Enterprises, thereby reducing the Company's
ownership in CCNY below 50 percent.
If valued at the December 31, 1994, quoted closing price of
publicly traded Coca-Cola Enterprises shares, the calculated value of
the Company's investment in Coca-Cola Enterprises would have exceeded
its carrying value by approximately $490 million.
OTHER EQUITY INVESTMENTS
At December 31, 1994, the Company owned approximately 50 percent of
Coca-Cola Amatil, an Australian-based bottler of Company products that
operates in 12 countries. In early 1995, the Company reduced its
ownership in Coca-Cola Amatil to approximately 49 percent and,
accordingly, the investment has been accounted for by the equity
method.
In the fourth quarter of 1993, Coca-Cola Amatil issued
approximately 8 million shares of stock to acquire the Company's
franchise bottler in Jakarta, Indonesia. This transaction resulted in
a pretax gain for the Company of approximately $12 million.
At December 31, 1994, the excess of the Company's investment over
its equity in the underlying net assets of Coca-Cola Amatil was
approximately $191 million, which is being amortized over 40 years.
In 1993, the Company acquired a 30 percent equity interest in
Coca-Cola FEMSA, which operates bottling facilities in Mexico and
Argentina, for $195 million. At December 31, 1994, the excess of the
Company's investment over its equity in the underlying net assets of
Coca-Cola FEMSA was approximately $108 million, which is being
amortized over 40 years.
-52-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Operating results include the Company's proportionate share of
income from equity investments since the respective dates of
investment. A summary of financial information for the Company's
equity investments, other than Coca-Cola Enterprises, is as follows
(in millions):
December 31, 1994 1993
- ------------------------------------------------------------------
Current assets $ 2,747 $ 2,294
Noncurrent assets 5,316 4,780
- ------------------------------------------------------------------
Total assets $ 8,063 $ 7,074
==================================================================
Current liabilities $ 2,382 $ 1,926
Noncurrent liabilities 2,669 2,366
- ------------------------------------------------------------------
Total liabilities $ 5,051 $ 4,292
==================================================================
Share-owners' equity $ 3,012 $ 2,782
==================================================================
Company equity investment $ 1,808 $ 1,629
==================================================================
Year Ended December 31, 1994 1993 1992
- ------------------------------------------------------------------
Net operating revenues $ 9,668 $ 8,168 $ 7,027
Cost of goods sold 6,397 5,385 4,740
- ------------------------------------------------------------------
Gross profit $ 3,271 $ 2,783 $ 2,287
==================================================================
Operating income $ 987 $ 673 $ 364
==================================================================
Operating cash flow $ 1,280 $ 984 $ 923
==================================================================
Income before changes
in accounting principles $ 323 $ 258 $ 199
==================================================================
Net income $ 323 $ 258 $ 74
==================================================================
Company equity income $ 104 $ 97 $ 71
==================================================================
Equity investments include certain non-bottling investees.
Net income for the Company's equity investments in 1993 reflects
an $86 million after-tax charge recorded by Coca-Cola Beverages Ltd.,
related to restructuring its operations in Canada.
Net sales to equity investees other than Coca-Cola Enterprises
were $1.2 billion in 1994 and 1993 and $1.3 billion in 1992. The
Company also participates in various marketing, promotional and other
activities with these investees, the majority of which are located
outside the United States.
If valued at the December 31, 1994, quoted closing prices of
shares actively traded on stock markets, the calculated value of the
Company's equity investments in publicly traded bottlers other than
Coca-Cola Enterprises would have exceeded the Company's carrying value
by approximately $738 million.
4. FINANCE SUBSIDIARY
Coca-Cola Financial Corporation (CCFC) provides loans and other forms
of financing to Coca-Cola bottlers and customers for the acquisition
of sales-related equipment and for other business purposes. The
approximate contractual maturities of finance receivables for the five
years succeeding December 31, 1994, are as follows (in millions):
1995 1996 1997 1998 1999
- ---------------------------------------------------------
$ 55 $ 41 $ 30 $ 129 $ 17
=========================================================
These amounts do not reflect possible prepayments or renewals.
CCFC has provided $100 million in subordinated loans to CCNY and
has agreed to issue up to $50 million in letters of credit on CCNY's
behalf, of which $26 million was committed at December 31, 1994.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in
millions):
December 31, 1994 1993
- ---------------------------------------------------------------
Accrued marketing $ 425 $ 371
Container deposits 112 122
Accrued compensation 189 169
Accounts payable
and other accrued expenses 1,838 1,555
- ---------------------------------------------------------------
$ 2,564 $ 2,217
===============================================================
6. SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS
Loans and notes payable consist primarily of commercial paper issued
in the United States. At December 31, 1994, the Company had $2.8
billion in lines of credit and other short-term credit facilities
available, under which $2.0 billion was outstanding. Included was $1.8
billion outstanding in commercial paper borrowings. The Company's
weighted average interest rates for notes payable to financial
institutions and commercial paper, respectively, were approximately
10.7 and 5.8 percent at December 31, 1994, and 9.7 and 3.3 percent at
December 31, 1993. The weighted average interest rate for notes
payable to financial institutions reflects the impact of borrowing in
certain high inflation countries.
These facilities are subject to normal banking terms and
conditions. Some of the financial arrangements require compensating
balances, none of which are presently significant to the Company.
-53-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. ACCRUED TAXES
Accrued taxes consist of the following (in millions):
December 31, 1994 1993
- ------------------------------------------------------------------
Income taxes $ 1,312 $ 1,106
Sales, payroll and other taxes 218 176
- ------------------------------------------------------------------
$ 1,530 $ 1,282
==================================================================
8. LONG-TERM DEBT
Long-term debt consists of the following (in millions):
December 31, 1994 1993
- -------------------------------------------------------------------
7 3/4% U.S. dollar notes due 1996 $ 250 $ 250
5 3/4% Japanese yen notes due 1996 301 270
5 3/4% German mark notes due 1998(1) 161 147
7 7/8% U.S. dollar notes due 1998 250 249
6 5/8% U.S. dollar notes due 2002 149 149
6% U.S. dollar notes due 2003 150 150
7 3/8% U.S. dollar notes due 2093 116 148
Other, due 1995 to 2013(2) 84 84
- -------------------------------------------------------------------
1,461 1,447
Less current portion 35 19
- -------------------------------------------------------------------
$ 1,426 $ 1,428
===================================================================
(1)Portions of these notes have been swapped for liabilities
denominated in other currencies.
(2)The weighted average interest rate is approximately 9.4 percent.
After giving effect to interest rate management instruments (see
Note 10), the principal amount of the Company's long-term debt that
had fixed and variable interest rates, respectively, was $849 million
and $612 million at December 31, 1994, and $1,297 million and $150
million at December 31, 1993. The weighted average interest rate on
the Company's long-term debt was 6.6 and 6.0 percent at December 31,
1994 and 1993, respectively.
Maturities of long-term debt for the five years succeeding
December 31, 1994, are as follows (in millions):
1995 1996 1997 1998 1999
- ---------------------------------------------------------
$ 35 $ 574 $ 7 $ 418 $ 4
=========================================================
The above notes include various restrictions, none of which are
presently significant to the Company.
Interest paid was approximately $197 million, $158 million and
$174 million in 1994, 1993 and 1992, respectively.
9. FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reflected in the consolidated balance sheets for
cash, cash equivalents, loans and notes payable approximate their
respective fair values due to the short maturities of these
instruments. The fair values for debt and marketable equity
securities, investments, receivables, long-term debt and hedging
instruments are based primarily on quoted market prices for those or
similar instruments. A comparison of the carrying value and fair value
of these financial instruments is as follows (in millions):
Carrying Fair
December 31, Value Value
- -------------------------------------------------------------------
1994
Current marketable securities $ 145 $ 145
Finance subsidiary receivables 310 315
Cost method investments,
principally bottling companies 178 236
Marketable securities and other assets 1,163 1,156
Long-term debt (1,461) (1,416)
Hedging instruments 64 (293)
====================================================================
1993
Current marketable securities $ 80 $ 102
Finance subsidiary receivables 259 265
Cost method investments,
principally bottling companies 88 259
Marketable securities and other assets 868 865
Long-term debt (1,447) (1,531)
Hedging instruments 31 (142)
===================================================================
CERTAIN DEBT AND MARKETABLE EQUITY SECURITIES
As discussed in Note 1, 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 equity securities, other than investments accounted for by
the equity method, are categorized as either trading, available-for-
sale or held-to-maturity. At January 1 and December 31, 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.
-54-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Available-for-sale and held-to-maturity securities consist of the
following (in millions):
Gross Gross Estimated
Unrealized Unrealized Fair
December 31, Cost Gains Losses Value
- --------------------------------------------------------------------------
1994
Available-for-sale
securities
Equity securities $ 48 $ 76 $ (4) $ 120
Collateralized
mortgage
obligations 150 -- (11) 139
Other debt
securities 32 -- -- 32
- --------------------------------------------------------------------------
$ 230 $ 76 $ (15) $ 291
==========================================================================
Held-to-maturity
securities
Bank and
corporate debt $ 1,388 $ -- $ -- $ 1,388
Other debt
securities 68 -- -- 68
- --------------------------------------------------------------------------
$ 1,456 $ -- $ -- $ 1,456
==========================================================================
These investments were included in the following captions on the
consolidated balance sheet (in millions):
Available-for-Sale Held-to-Maturity
December 31, Securities Securities
- --------------------------------------------------------------------------
1994
Cash and cash equivalents $ -- $ 1,041
Current marketable securities 87 58
Cost method investments,
principally bottling companies 58 --
Marketable securities
and other assets 146 357
- --------------------------------------------------------------------------
$ 291 $ 1,456
==========================================================================
The contractual maturities of these investments as of December 31,
1994, were as follows (in millions):
Available-for-Sale Held-to-Maturity
Securities Securities
- --------------------------------------------------------------------------
Fair Amortized Fair
Cost Value Cost Value
- --------------------------------------------------------------------------
1995 $ 27 $ 27 $ 1,099 $ 1,099
1996-1999 5 5 315 315
After 1999 -- -- 42 42
Collateralized
mortgage obligations 150 139 -- --
Equity securities 48 120 -- --
- --------------------------------------------------------------------------
$ 230 $ 291 $ 1,456 $ 1,456
==========================================================================
Gross realized gains on sales of available-for-sale securities
totaled $1 million for the year ended December 31, 1994. Gross
realized losses for the same period were not material. The cost of
securities sold is based on the specific identification method.
10. HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company employs the use of derivative financial instruments for
the purpose of reducing its exposure to adverse fluctuations in
interest and foreign exchange rates. While these hedging instruments
are subject to fluctuations in value, such fluctuations are generally
offset by the value of the underlying exposures being hedged. The
Company effectively monitors the use of these derivative financial
instruments through the use of objective measurement systems, well-
defined market and credit risk limits and timely reports to senior
management according to prescribed guidelines.
INTEREST RATE MANAGEMENT
Management of the Company has developed and implemented a policy to
maintain the percentage of fixed and variable rate debt within certain
parameters. The Company enters into interest rate swap agreements
which maintain the fixed/variable mix within these defined parameters.
In these swaps, the Company agrees to exchange, at specified
intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount.
These contracts had maturities ranging from 1 to 10 years at December
31, 1994. Variable rates are predominately linked to the LIBOR (London
Interbank Offered Rate). Any differences paid or received on interest
rate swap agreements are recognized as adjustments to interest expense
over the life of each swap, thereby adjusting the effective interest
rate on the underlying obligation.
Additionally, the Company enters into interest rate cap
agreements that entitle the Company to receive from a financial
institution the amount, if any, by which the Company's interest
payments on its variable rate debt exceed pre-specified interest rates
through 1997. Premiums paid for interest rate cap agreements are
included in prepaid expenses and other assets and are amortized to
interest expense over the terms of the respective agreements. Payments
received pursuant to the interest rate cap agreements, if any, are
recognized as an adjustment of the interest expense on the underlying
debt instruments.
-55-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOREIGN CURRENCY MANAGEMENT
The purpose of the Company's foreign currency hedging activities is to
reduce the risk that the eventual dollar net cash inflows resulting
from sales to foreign customers will be adversely affected by changes
in exchange rates.
The Company enters into forward exchange contracts and purchases
currency options to hedge certain firm sale commitments denominated in
foreign currencies (principally European currencies and Japanese yen).
The Company also purchases currency options to hedge certain
anticipated but not yet firmly committed sales, as well as anticipated
foreign currency remittances from certain international operations
above contractual minimums. These are expected to be denominated
primarily in European currencies and Japanese yen. Premiums paid as
well as net deferred realized gains and losses are included in prepaid
expenses and other assets and are recognized in income, along with
unrealized gains and losses, in the same period as the hedged
transaction. Approximately $10 million and $9 million of net losses
realized on settled contracts entered into as hedges of firmly
committed transactions which have not yet occurred were deferred at
December 31, 1994 and 1993, respectively. Net deferred gains/losses
from hedging anticipated but not yet firmly committed transactions
were not material at December 31, 1994 or 1993.
Gains and losses on derivative financial instruments that are
designated and effective as hedges of net investments in international
operations are included in share-owners' equity as a foreign currency
translation adjustment.
The estimated fair values of derivatives used to hedge or modify
the Company's risks will fluctuate over time. These fair value amounts
should not be viewed in isolation, but rather in relation to the fair
values of the underlying hedged transactions and investments and the
overall reduction in the Company's exposure to adverse fluctuations in
interest and foreign exchange rates.
The notional amounts of the derivative financial instruments do
not necessarily represent amounts exchanged by the parties and,
therefore, are not a direct measure of the exposure of the Company
through its use of derivatives. The amounts exchanged are calculated
on the basis of the notional amounts and the other terms of the
derivatives, which relate to interest rates, exchange rates or other
financial indices.
The following table presents the aggregate notional principal
amounts, carrying values, fair values and maturities of the Company's
derivative financial instruments outstanding at December 31, 1994 and
1993 (in millions):
Notional
Principal Carrying Fair
December 31, Amounts Values Values Maturity
- -----------------------------------------------------------------------
1994
Interest rate
management
Swap agreements
Assets $ 626 $ 3 $ (30) 1995-2003
Liabilities 225 (1) 1 1995-2005
Interest rate caps
Assets 400 3 5 1995-1997
Foreign currency
management
Forward contracts
Assets 1,887 24 33 1995-1996
Liabilities 666 (10) (9) 1995
Swap agreements
Assets 399 23 22 1995-2000
Liabilities 2,104 (44) (356) 1995-2002
Purchased options
Assets 3,485 66 41 1995-1996
=======================================================================
$ 9,792 $ 64 $ (293)
=======================================================================
1993
Interest rate
management
Swap agreements
Assets $ 28 $ -- $ 3 1995
Liabilities 345 (7) (4) 1995-2003
Foreign currency
management
Forward contracts
Assets 436 11 11 1994
Liabilities 590 (9) (9) 1994-1996
Swap agreements
Assets 848 14 14 1994-1998
Liabilities 1,147 -- (182) 1994-2002
Purchased options
Assets 1,252 22 25 1994-1996
=======================================================================
$ 4,646 $ 31 $ (142)
=======================================================================
Virtually all of the Company's derivatives are "over-the-counter"
instruments.
-56-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maturities of derivative financial instruments held at December 31,
1994, are as follows (in millions):
1995 1996 1997 1998 THROUGH 2005
- ------------------------------------------------------------
$ 6,441 $ 1,100 $ 990 $ 1,261
============================================================
The Company has established strict counterparty credit guidelines
and only enters into transactions with financial institutions of
investment grade or better. Counterparty exposures are monitored daily
and any downgrade in credit rating receives immediate review. If a
downgrade in the credit rating of a counterparty were to occur, the
Company has provisions to require collateral in the form of U.S.
government securities for transactions with maturities in excess of
three years. To mitigate pre-settlement risk, minimum credit standards
become more stringent as the duration of the derivative financial
instrument increases. To minimize the concentration of credit risk,
the Company enters into derivative transactions with a portfolio of
financial institutions. As a result, the Company considers the risk of
counterparty default to be minimal.
11. COMMITMENTS AND CONTINGENCIES
At December 31, 1994, the Company was contingently liable for
guarantees of indebtedness owed by third parties of $170 million, of
which $44 million is related to independent bottling licensees.
At December 31, 1994, the Company, through its finance
subsidiary, has committed to provide $100 million in the form of
subordinated loans to an equity investee bottler to fund certain
transactions over the next five years.
The Mitsubishi Bank Limited has provided a yen denominated
guarantee for the equivalent of $261 million in support of a
suspension of enforcement of a tax assessment levied by the Japanese
tax authorities. The Company has agreed to indemnify Mitsubishi if
amounts are paid pursuant to the guarantee. This matter is being
reviewed by the tax authorities of the United States and Japan under
the tax treaty signed by the two nations to prevent double taxation.
Any additional tax payable to Japan should be offset by tax credits in
the United States and would not adversely affect earnings.
In the opinion of management, it is not probable that the Company
will be required to satisfy these guarantees or indemnification
agreements. The fair value of these contingent liabilities is
immaterial to the Company's consolidated financial statements.
It is also the opinion of management that the Company's exposure
to concentrations of credit risk is limited, due to the diverse
geographic areas covered by the Company's operations.
12. RESTRICTED STOCK, STOCK OPTIONS AND OTHER STOCK PLANS
The Company sponsors restricted stock award plans, stock option plans,
Incentive Unit Agreements and Performance Unit Agreements.
Under the amended 1989 Restricted Stock Award Plan and the
amended 1983 Restricted Stock Award Plan (the Restricted Stock Plans),
20 million and 12 million shares of restricted common stock,
respectively, may be granted to certain officers and key employees of
the Company.
At December 31, 1994, 17 million shares were available for grant
under the Restricted Stock Plans. Participants are entitled to vote
and receive dividends on the shares, and under the 1983 Restricted
Stock Award Plan, participants are reimbursed by the Company for
income taxes imposed on the award, but not for taxes generated by the
reimbursement payment. The shares are subject to certain transfer
restrictions and may be forfeited if a participant leaves the Company
for reasons other than retirement, disability or death, absent a
change in control of the Company. On July 18, 1991, the Restricted
Stock Plans were amended to specify age 62 as the minimum retirement
age. The 1983 Restricted Stock Award Plan was further amended to
conform to the terms of the 1989 Restricted Stock Award Plan by
requiring a minimum of five years of service between the date of the
award and retirement. The amendments affect shares granted after
July 18, 1991.
Under the Company's 1991 Stock Option Plan (the Option Plan), a
maximum of 60 million shares of the Company's common stock may be
issued or transferred to certain officers and employees pursuant to
stock options and stock appreciation rights granted under the Option
Plan. The stock appreciation rights permit the holder, upon
surrendering all or part of the related stock option, to receive cash,
common stock or a combination thereof, in an amount up to 100 percent
of the difference between the market price and the option price. No
stock appreciation rights have been granted since 1990, and the
Company presently does not intend to grant additional stock
appreciation rights in the future. Options outstanding at December 31,
1994, also include various options granted under previous plans.
-57-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Further information relating to options is as follows (in millions,
except per share amounts):
1994 1993 1992
- ----------------------------------------------------------------------
Outstanding at January 1, 30 31 36
Granted 7 6 4
Exercised (4) (7) (9)
- ----------------------------------------------------------------------
Outstanding at December 31, 33 30 31
======================================================================
Exercisable at December 31, 22 22 23
======================================================================
Shares available at December 31,
for options that may be granted 38 45 51
Prices per share
Exercised $5-$44 $4-$41 $4-$28
Unexercised at December 31, $6-$51 $5-$44 $4-$41
======================================================================
In 1988, the Company entered into Incentive Unit Agreements
whereby, subject to certain conditions, certain officers were given
the right to receive cash awards based on the market value of 1.2
million shares of the Company's common stock at the measurement dates.
Under the Incentive Unit Agreements, the employee is reimbursed by the
Company for income taxes imposed when the value of the units is paid,
but not for taxes generated by the reimbursement payment. In 1993,
400,000 units were paid, leaving 800,000 units outstanding at December
31, 1993. No units were paid in 1994, leaving the number of units
outstanding unchanged at December 31, 1994.
In 1985, the Company entered into Performance Unit Agreements,
whereby certain officers were given the right to receive cash awards
based on the difference in the market value of approximately 2.2
million shares of the Company's common stock at the measurement dates
and the base price of $5.16, the market value as of January 2, 1985.
In 1993, 780,000 units were paid, leaving approximately 1.4 million
units outstanding at December 31, 1993. No units were paid in 1994,
leaving the number of units outstanding unchanged at December 31,
1994.
13. PENSION BENEFITS
The Company sponsors and/or contributes to pension plans covering
substantially all U.S. employees and certain employees in
international locations. The benefits are primarily based on years of
service and the employees' compensation for certain periods during the
last years of employment. Pension costs are generally funded
currently, subject to regulatory funding limitations. The Company also
sponsors nonqualified, unfunded defined benefit plans for certain
officers and other employees. In addition, the Company and its
subsidiaries have various pension plans and other forms of
postretirement arrangements outside the United States.
-58-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total pension expense for all benefit plans, including defined benefit
plans, amounted to approximately $73 million in 1994, $57 million in
1993 and $49 million in 1992. Net periodic pension cost for the
Company's defined benefit plans consists of the following (in
millions):
U.S. Plans International Plans
-------------------- ---------------------
Year Ended December 31, 1994 1993 1992 1994 1993 1992
- --------------------------------------------------------------------- ---------------------
Service cost-benefits earned during the period $ 22 $ 17 $ 15 $ 24 $ 17 $ 18
Interest cost on projected benefit obligation 53 53 50 25 22 20
Actual return on plan assets (4) (77) (36) (21) (27) (19)
Net amortization and deferral (44) 31 (9) 5 13 3
- --------------------------------------------------------------------- ---------------------
Net periodic pension cost $ 27 $ 24 $ 20 $ 33 $ 25 $22
===================================================================== =====================
For certain U.S. plans, the Company has authorized a cost of living
adjustment for retirees effective April 1, 1995. The funded status of
the plans at December 31, 1994, reflects this adjustment. The funded
status for the Company's defined benefit plans is as follows (in
millions):
U.S. Plans International Plans
-------------------------------------------- ----------------------------------------------
Assets Exceed Accumulated Benefits Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets Accumulated Benefits Exceed Assets
December 31, 1994 1993 1994 1993 1994 1993 1994 1993
- ------------------------------------------------------ --------------------- ----------------------- --------------------
Actuarial present value of
benefit obligations
Vested benefit obligation $ 479 $ 481 $ 101 $ 109 $ 156 $ 139 $ 147 $ 110
====================================================== ==================== ======================== ====================
Accumulated benefit obligation $ 521 $ 523 $ 104 $ 111 $ 157 $ 151 $ 175 $ 126
====================================================== ===================== ======================= ====================
Projected benefit obligation $ 599 $ 598 $ 125 $ 133 $ 199 $ 196 $ 237 $ 177
Plan assets at fair value(1) 597 631 2 2 235 200 110 94
- ------------------------------------------------------ --------------------- ----------------------- --------------------
Plan assets in excess of
(less than) projected
benefit obligation (2) 33 (123)(2) (131)(2) 36 4 (127) (83)
Unrecognized net (asset)
liability at transition (30) (34) 15 17 (18) (16) 36 34
Unrecognized prior service cost 37 8 15 15 4 -- 13 9
Unrecognized net (gain) loss (30) (24) 18 36 (1) 28 16 (3)
Adjustment required to recognize
minimum liability -- -- (28) (46) -- -- (9) (7)
- ------------------------------------------------------ --------------------- ----------------------- --------------------
Accrued pension asset (liability)
included in the consolidated
balance sheet $ (25) $ (17) $ (103) $ (109) $ 21 $ 16 $ (71) $ (50)
====================================================== ===================== ======================= ====================
(1)Primarily listed stocks, bonds and government securities.
(2)Substantially all of this amount relates to nonqualified, unfunded defined benefit plans.
The assumptions used in computing the preceding information are as follows:
International Plans
U.S. Plans (weighted average rates)
----------------------------- ------------------------------
Year Ended December 31, 1994 1993 1992 1994 1993 1992
- ------------------------------------------------------------------------------ ------------------------------
Discount rates 8 1/4% 7 1/4% 8 1/2% 6% 6 1/2% 7%
Rates of increase in compensation levels 5 1/4% 4 3/4% 6% 4 1/2% 5% 5 1/2%
Expected long-term rates of return on assets 9 1/2% 9 1/2% 9 1/2% 6% 7% 7%
============================================================================== ===============================
-59-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. OTHER POSTRETIREMENT BENEFITS
The Company has plans providing postretirement health care and life
insurance benefits to substantially all U.S. employees and certain
employees in international locations who retire with a minimum of five
years of service. The Company adopted SFAS 106 for all U.S. and
international plans as of January 1, 1992. In 1992, the Company
recorded an accumulated obligation for consolidated operations of $146
million, which is net of $92 million in deferred tax benefits. The
Company also recorded an additional charge of $73 million, net of $13
million of deferred tax benefits, representing the Company's
proportionate share of accumulated postretirement benefit obligations
recognized by bottling investees accounted for by the equity method.
Net periodic cost for the Company's postretirement health care and
life insurance benefits consists of the following (in millions):
Year Ended December 31, 1994 1993 1992
- -------------------------------------------------------------------
Service cost $ 12 $ 10 $ 9
Interest cost 21 21 20
Other (1) (1) --
- -------------------------------------------------------------------
$ 32 $ 30 $ 29
===================================================================
The Company contributes to a Voluntary Employees' Beneficiary
Association trust that will be used to partially fund health care
benefits for future retirees. The Company is funding benefits to the
extent contributions are tax-deductible, which under current
legislation is limited. In general, retiree health benefits are paid
as covered expenses are incurred. The funded status for the Company's
postretirement health care and life insurance plans is as follows (in
millions):
December 31, 1994 1993
- ------------------------------------------------------------------
Accumulated postretirement
benefit obligations:
Retirees $ 128 $ 132
Fully eligible active
plan participants 35 35
Other active plan participants 120 131
- ------------------------------------------------------------------
Total benefit obligation 283 298
Plan assets at fair value(1) 41 42
- ------------------------------------------------------------------
Plan assets less than benefit obligation (242) (256)
Unrecognized prior service cost (3) --
Unrecognized net (gain) loss (7) 23
- ------------------------------------------------------------------
Accrued postretirement benefit
liability included in the
consolidated balance sheet $ (252) $ (233)
==================================================================
(1)Consists of corporate bonds, government securities and short-term
investments.
The assumptions used in computing the preceding information are as
follows:
Year Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------
Discount rate 8 1/4% 7 1/4% 8 1/2%
Rate of increase in compensation levels 5 1/4% 4 3/4% 6%
- ---------------------------------------------------------------------------
The rate of increase in the per capita costs of covered health
care benefits is assumed to be 10 1/2 percent in 1995, decreasing
gradually to 5 3/4 percent by the year 2005. Increasing the assumed
health care cost trend rate by 1 percentage point would increase the
accumulated postretirement benefit obligation as of December 31, 1994,
by approximately $32 million and increase net periodic postretirement
benefit cost by approximately $5 million in 1994.
15. INCOME TAXES
Income before income taxes and changes in accounting principles
consists of the following (in millions):
Year Ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------
United States $ 1,214 $ 1,035 $ 762
International 2,514 2,150 1,984
- --------------------------------------------------------------------------
$ 3,728 $ 3,185 $ 2,746
==========================================================================
Income tax expense (benefit) consists of the following
(in millions):
Year Ended United State &
December 31, States Local International Total
- ------------------------------------------------------------------------
1994
Current $ 299 $ 38 $ 779 $ 1,116
Deferred 24 5 29 58
1993
Current $ 356 $ 34 $ 669 $ 1,059
Deferred(1) (64) 5 (3) (62)
1992
Current $ 278 $ 36 $ 576 $ 890
Deferred(1) (60) (1) 34 (27)
========================================================================
(1)Additional deferred tax benefits of $8 million in 1993 and $105
million in 1992 have been included in the SFAS 112 and SFAS 106
transition effect charges, respectively.
The Company made income tax payments of approximately $785
million, $650 million and $856 million in 1994, 1993 and 1992,
respectively.
-60-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the statutory U.S. federal rate and effective
rates is as follows:
Year Ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------
Statutory U.S. federal rate 35.0% 35.0% 34.0%
State income taxes-net of
federal benefit 1.0 1.0 1.0
Earnings in jurisdictions taxed
at rates different from the
statutory U.S. federal rate (4.3) (5.1) (3.8)
Equity income (1.1) (1.7) (1.0)
Other-net .9 2.1 1.2
- ------------------------------------------------------------------------
31.5% 31.3% 31.4%
========================================================================
The Company's effective tax rate reflects the favorable U.S. tax
treatment from manufacturing facilities in Puerto Rico that operate
under a negotiated exemption grant that expires December 31, 2009.
Changes to U.S. tax law enacted in 1993 limited the utilization of the
favorable tax treatment from operations in Puerto Rico in 1994. The
Company's effective tax rate also reflects the tax benefit derived
from having significant operations outside the United States, which
are taxed at rates lower than the U.S. statutory rate of 35 percent.
As a result of changes in U.S. tax law, the Company was required to
record charges for additional taxes and tax-related expenses that
reduced net income by approximately $51 million in 1993.
Appropriate U.S. and international taxes have been provided for
earnings of subsidiary companies that are expected to be remitted to
the parent company. Exclusive of amounts that would result in little
or no tax if remitted, the cumulative amount of unremitted earnings
from international subsidiaries that are expected to be indefinitely
reinvested is approximately $328 million at December 31, 1994. The
taxes that would be paid upon remittance of these earnings are
approximately $115 million.
The tax effects of temporary differences and carryforwards that
give rise to significant portions of deferred tax assets and
liabilities consist of the following (in millions):
December 31, 1994 1993
- ------------------------------------------------------------
Deferred tax assets:
Benefit plans $ 324 $ 298
Liabilities and reserves 169 177
Net operating loss carryforwards 108 141
Other 128 120
- ------------------------------------------------------------
Gross deferred tax assets 729 736
Valuation allowance (46) (75)
- ------------------------------------------------------------
$ 683 $ 661
============================================================
Deferred tax liabilities:
Property, plant and equipment $ 362 $ 342
Equity investments 188 180
Intangible assets 34 52
Other 72 61
- ------------------------------------------------------------
$ 656 $ 635
============================================================
Net deferred tax asset(1) $ 27 $ 26
============================================================
(1)Deferred tax assets of $207 and $139 million have been included
in the consolidated balance sheet caption "marketable securities
and other assets" at December 31, 1994 and 1993, respectively.
At December 31, 1994, the Company had $387 million of operating
loss carryforwards available to reduce future taxable income of
certain international subsidiaries. Loss carryforwards of $187 million
must be utilized within the next five years, and $200 million can be
utilized over an indefinite period. A valuation allowance has been
provided for a portion of the deferred tax assets related to these
loss carryforwards.
16. NET CHANGE IN OPERATING ASSETS AND LIABILITIES
The changes in operating assets and liabilities, net of effects of
acquisitions and divestitures of businesses and unrealized exchange
gains/losses, are as follows (in millions):
Year Ended December 31, 1994 1993 1992
- -----------------------------------------------------------------------
Increase in trade
accounts receivable $ (169) $ (151) $ (147)
(Increase) decrease in inventories 43 (41) (138)
Increase in prepaid expenses
and other assets (273) (76) (112)
Increase (decrease) in accounts
payable and accrued expenses 197 (44) 405
Increase in accrued taxes 200 355 57
Increase (decrease) in
other liabilities 131 11 (108)
- -----------------------------------------------------------------------
$ 129 $ 54 $ (43)
=======================================================================
-61-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACQUISITIONS AND INVESTMENTS
During 1994, the Company's acquisition and investment activity, which
included investments in bottling operations, totaled $311 million.
During 1993 and 1992, the Company's acquisition and investment
activity totaled $611 and $388 million, respectively.
These acquisitions have been accounted for by the purchase method
of accounting, and accordingly, their results have been included in
the consolidated financial statements from their respective dates of
acquisition. Had the results of these businesses been included in
operations commencing with 1992, the reported results would not have
been materially affected.
During 1994, the Company invested approximately $120 million in a
joint venture known as the Coca-Cola Bottling Companies of Egypt. This
joint venture was formed following the privatization of the Egyptian
public sector bottler. In 1993, the Company acquired a 30 percent
interest in Coca-Cola FEMSA, which operates bottling facilities in
Mexico and Argentina, for $195 million. None of the acquisitions in
1992 were individually significant.
18. NONRECURRING ITEMS
Upon a favorable court decision in 1993, the Company reversed
previously recorded reserves for bottler litigation, resulting in a
$13 million reduction to selling, administrative and general expenses
and a $10 million reduction to interest expense. Selling,
administrative and general expenses for 1993 also include provisions
of $63 million to increase efficiencies in European, domestic and
corporate operations. Also in 1993, equity income was reduced by $42
million related to restructuring charges recorded by Coca-Cola
Beverages Ltd. Other income (deductions)-net included a $50 million
pretax gain recorded by the foods business sector upon the sale of
citrus groves in the United States, and a $34 million pretax gain
recognized on the sale of property no longer required as a result of a
consolidation of manufacturing operations in Japan.
19. SUBSEQUENT EVENTS
In early 1995, the Company sold 100 percent of the capital stock of
Coca-Cola Poland Ltd. and Coca-Cola West Poland Ltd. to Coca-Cola
Amatil for total consideration of approximately $238 million, subject
to certain contingent adjustments.
In early 1995, the Company reduced its voting and economic
ownership in Coca-Cola Amatil to approximately 49 percent, consistent
with its stated intention of ending temporary control.
NET OPERATING REVENUES BY LINE OF BUSINESS
[bar chart]
Year Ended December 31, 1992 1993 1994
- ----------------------------------------------------------------------
Foods 13% 12% 11%
Soft Drinks-International 65% 66% 67%
Soft Drinks-United States 22% 22% 22%
OPERATING INCOME BY LINE OF BUSINESS
[bar chart]
Year Ended December 31, 1992 1993 1994
- ----------------------------------------------------------------------
Foods 3% 3% 3%
Soft Drinks-International 79% 78% 79%
Soft Drinks-United States 18% 19% 18%
-62-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. LINES OF BUSINESS
The Company operates in two major lines of business: soft drinks and
foods (principally juice and juice-drink products). Information
concerning operations in these businesses is as follows (in millions):
Soft Drinks
---------------------------------
United States International Foods Corporate Consolidated
- --------------------------------------------------------------------------------------------------------------------
1994
Net operating revenues $ 3,506 $ 10,906 $ 1,728 $ 32 $ 16,172
Operating income 761 3,261 123 (437) 3,708
Identifiable operating assets 2,301 6,875 731 1,456(1) 11,363
Equity income 134 134
Investments (principally
bottling companies) 2,510 2,510
Capital expenditures 214 536 39 89 878
Depreciation and amortization 92 221 38 60 411
====================================================================================================================
1993
Net operating revenues $ 3,052 $ 9,205 $ 1,680 $ 20 $ 13,957
Operating income 680(2) 2,753(2) 117 (448)(2) 3,102
Identifiable operating assets 1,956 5,809 761 1,280(1) 9,806
Equity income 91(2) 91
Investments (principally
bottling companies) 2,215 2,215
Capital expenditures 136 557 30 77 800
Depreciation and amortization 91 172 38 59 360
====================================================================================================================
1992
Net operating revenues $ 2,813 $ 8,551 $ 1,675 $ 35 $ 13,074
Operating income 560 2,521 112 (423) 2,770
Identifiable operating assets 1,812 5,251 791 1,035(1) 8,889
Equity income 65 65
Investments (principally
bottling companies) 2,163 2,163
Capital expenditures 169 736 38 140 1,083
Depreciation and amortization 87 157 35 43 322
====================================================================================================================
Intercompany transfers between sectors are not material.
Certain prior year amounts related to net operating revenues and operating income have been
reclassified to conform to the current year presentation.
(1)Corporate identifiable operating assets are composed principally of marketable securities,
finance subsidiary receivables and fixed assets.
(2)Operating income for soft drink operations in the United States, International operations and
Corporate was reduced by $13 million, $33 million and $17 million, respectively, for provisions
to increase efficiencies. Equity income was reduced by $42 million related to restructuring
charges recorded by Coca-Cola Beverages Ltd.
Soft Drinks
Compound Growth Rates -------------------------------
Ending 1994 United States International Foods Consolidated
- -------------------------------------------------------------------------------------------------------
Net operating revenues
5 years 10% 18% 2% 13%
10 years 8% 16% 3% 12%
========================================================================================================
Operating income
5 years 14% 17% 7% 17%
10 years 12% 19% 0% 16%
========================================================================================================
-63-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. OPERATIONS IN GEOGRAPHIC AREAS
Information about the Company's operations by geographic area is as
follows (in millions):
Northeast
United European Latin Europe/ Pacific &
States Africa Community America Middle East Canada Corporate Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
1994
Net operating revenues $ 5,092 $ 522 $ 4,255 $ 1,928 $ 880 $ 3,463 $ 32 $ 16,172
Operating income 869 182 984 713 184 1,213 (437) 3,708
Identifiable operating assets 2,991 357 3,295 1,164 771 1,329 1,456(1) 11,363
Equity income 134 134
Investments
(principally bottling
companies) 2,510 2,510
Capital expenditures 252 27 201 129 149 31 89 878
Depreciation and amortization 128 6 130 36 32 19 60 411
==============================================================================================================================
1993
Net operating revenues $ 4,586 $ 255 $ 3,834 $ 1,683 $ 677 $ 2,902 $ 20 $ 13,957
Operating income 782(2) 152 872(2) 582 152 1,010 (448)(2) 3,102
Identifiable operating assets 2,682 153 2,777 1,220 604 1,090 1,280(1) 9,806
Equity income 91(2) 91
Investments
(principally bottling
companies) 2,215 2,215
Capital expenditures 165 6 239 141 129 43 77 800
Depreciation and amortization 127 3 99 33 22 17 59 360
==============================================================================================================================
1992
Net operating revenues $ 4,339 $ 242 $ 3,984 $ 1,383 $ 546 $ 2,545 $ 35 $ 13,074
Operating income 658 129 889 502 108 907 (423) 2,770
Identifiable operating assets 2,563 139 2,587 1,185 435 945 1,035(1) 8,889
Equity income 65 65
Investments
(principally bottling
companies) 2,163 2,163
Capital expenditures 204 12 386 188 120 33 140 1,083
Depreciation and amortization 121 3 99 27 14 15 43 322
==============================================================================================================================
Intercompany transfers between geographic areas are not material.
Certain prior year amounts related to operating income have been reclassified to conform
to the current year presentation.
Identifiable liabilities of operations outside the United States amounted to
approximately $2.5 billion at December 31, 1994, and $1.9 billion at December 31, 1993
and 1992.
(1)Corporate identifiable operating assets are composed principally of marketable
securities, finance subsidiary receivables and fixed assets.
(2)Operating income for the United States, European Community and Corporate was reduced
by $13 million, $33 million and $17 million, respectively, for provisions to increase
efficiencies. Equity income was reduced by $42 million related to restructuring
charges recorded by Coca-Cola Beverages Ltd.
Northeast
Compounded Growth Rates United European Latin Europe/ Pacific &
Ending 1994 States Africa Community America Middle East Canada Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
Net operating revenues
5 years 7% 27% 18% 24% 27% 12% 13%
10 years 6% 6% 18% 16% 24% 14% 12%
==============================================================================================================================
Operating income
5 years 13% 18% 13% 26% 23% 15% 17%
10 years 9% 7% 20% 23% 21% 19% 16%
==============================================================================================================================
-64-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
NET OPERATING REVENUE BY GEOGRAPHIC AREA
[bar chart]
Year Ended December 31, 1992 1993 1994
- ----------------------------------------------------------------------
Pacific & Canada 19% 21% 22%
Northeast Europe/Middle East 4% 5% 5%
Latin America 11% 12% 12%
European Community 31% 27% 26%
Africa 2% 2% 3%
United States 33% 33% 32%
OPERATING INCOME BY GEOGRAPHIC AREA
[bar chart]
Year Ended December 31, 1992 1993 1994
- ----------------------------------------------------------------------
Pacific & Canada 28% 29% 29%
Northeast Europe/Middle East 3% 4% 5%
Latin America 16% 16% 17%
European Community 28% 25% 24%
Africa 4% 4% 4%
United States 21% 22% 21%
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHARE OWNERS
THE COCA-COLA COMPANY
We have audited the accompanying consolidated balance sheets of The
Coca-Cola Company and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income, share-owners'
equity and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of The Coca-Cola Company and subsidiaries at December 31,
1994 and 1993, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements,
in 1993 the Company changed its method of accounting for
postemployment benefits.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
January 24, 1995
-65-
THE COCA-COLA COMPANY AND SUBSIDIARIES
--------------------------------------
QUARTERLY DATA (UNAUDITED)
(In millions except per share data)
First Second Third Fourth Full
Year Ended December 31, Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------------------------------------
1994
Net operating revenues $ 3,352 $ 4,342 $ 4,461 $ 4,017 $ 16,172
Gross profit 2,110 2,675 2,701 2,519 10,005
Net income 521 758 708 567 2,554
Net income per share .40 .59 .55 .44 1.98
=====================================================================================
1993(1)
Net operating revenues $ 3,056 $ 3,899 $ 3,629 $ 3,373 $ 13,957
Gross profit 1,963 2,435 2,286 2,113 8,797
Income before change in
accounting principle 454 678 590 466 2,188
Net income 442 678 590 466 2,176
Income per share before
change in accounting
principle .35 .52 .45 .36 1.68
Net income per share .34 .52 .45 .36 1.67
=====================================================================================
(1)The first quarter of 1993 included an after-tax transition charge of $12 million
($.01 per share) related to the change in accounting for postemployment benefits.
The third quarter of 1993 included an after-tax impact of $47 million due to
changes in U.S. tax law which reduced full year after-tax income by $51 million
($.04 per share) and the reversal of previously recorded reserves for bottler
litigation of $23 million ($.01 per share after income taxes). The fourth quarter
of 1993 included provisions to increase efficiencies of $63 million ($.03 per share
after income taxes), a reduction of $42 million ($.02 per share after income taxes)
related to restructuring charges recorded by an equity investee, a gain from the
sale of real estate in Japan ($34 million, or $.02 per share after income taxes),
a gain from the sale of citrus groves in the United States ($50 million, or
$.02 per share after income taxes) and a gain recognized on the issuance of stock
by an equity investee of $12 million ($.01 per share after income taxes).
STOCK PRICES
Below are the New York Stock Exchange high, low and closing prices of
The Coca-Cola Company's stock for each quarter of 1994 and 1993.
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------
1994
High $44.75 $42.38 $50.00 $53.50
Low 40.13 38.88 41.00 48.00
Close 40.63 40.63 48.63 51.50
==========================================================================
1993
High $44.13 $43.63 $44.75 $45.13
Low 40.00 37.50 41.75 40.00
Close 42.63 43.00 42.25 44.63
==========================================================================
-67-
SHARE-OWNER INFORMATION
COMMON STOCK
Ticker symbol: KO
The Coca-Cola Company is one of 30 companies in the Dow Jones
Industrial Average.
Common stock of The Coca-Cola Company is listed and traded on the New
York Stock Exchange, which is the principal market for the common stock,
and also is traded on the Boston, Cincinnati, Midwest, Pacific and
Philadelphia stock exchanges. Outside the United States, the Company's
common stock is listed and traded on the German exchange in Frankfurt
and on Swiss exchanges in Zurich, Geneva, Bern, Basel and Lausanne.
Share owners of record at year-end: 195,036
Shares outstanding at year-end: 1.276 billion
DIVIDENDS
At its February 1995 meeting, the Company's Board of Directors increased
the quarterly dividend to 22 cents per share, equivalent to an annual
dividend of 88 cents per share. The Company has increased dividends each
of the last 33 years.
The Coca-Cola Company normally pays dividends four times a year,
usually on April 1, July 1, October 1 and December 15. The Company has
paid 295 consecutive quarterly dividends beginning in 1920.
DIVIDEND AND CASH INVESTMENT PLAN
All share owners of record are invited to participate in the Dividend
and Cash Investment Plan. The Plan provides a convenient, economical and
systematic method of acquiring additional shares of the Company's
common stock. The Plan permits share owners of record to reinvest
dividends from Company stock in shares of The Coca-Cola Company. Share
owners also may purchase Company stock through voluntary cash investments
of up to $60,000 per year.
All costs and commissions associated with joining and participating
in the plan are paid by the Company.
The Plan's administrator, First Chicago Trust Company of New York,
purchases stock for voluntary cash investments on or about the first of
each month, and for dividend reinvestment on April 1, July 1, October 1
and December 15.
At year-end, 52 percent of share owners of record were participants
in the Plan. In 1994, share owners invested $24.6 million in dividends
and $32.3 million in cash in the Plan.
ANNUAL MEETING OF SHARE OWNERS
April 19, 1995, at 9 a.m. local time
Hotel du Pont
11th and Market Streets
Wilmington, Delaware
PUBLICATIONS
THE COMPANY'S ANNUAL REPORT ON FORM 10-K AND QUARTERLY REPORTS ON
FORM 10-Q ARE AVAILABLE FREE OF CHARGE FROM THE OFFICE OF THE SECRETARY,
THE COCA-COLA COMPANY, P.O. DRAWER 1734, ATLANTA, GEORGIA 30301.
A "Notice of Annual Meeting of Share Owners and Proxy Statement"
are furnished to share owners in advance of the annual meeting. Interim
reports, containing financial results and other information, are also
distributed to share owners.
Also available from the Office of the Secretary are "Our Mission
and Our Commitment" and "The Chronicle of Coca-Cola Since 1886".
CORPORATE OFFICES
The Coca-Cola Company
One Coca-Cola Plaza
Atlanta, Georgia 30313
(404) 676-2121
MAILING ADDRESS
The Coca-Cola Company
P.O. Drawer 1734
Atlanta, Georgia 30301
SHARE-OWNER ACCOUNT ASSISTANCE
For address changes, dividend checks, direct deposit of dividends,
account consolidation, registration changes, lost stock certificates,
stock holdings and the Dividend and Cash Investment Plan:
Registrar and Transfer Agent
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, NJ 07303-2500
(800) 446-2617 or (201) 324-0498
For hearing impaired: (201) 222-4955
E-mail: FCTC@DELPHI.COM
or
Office of the Secretary
The Coca-Cola Company
(404) 676-2777
INSTITUTIONAL INVESTOR INQUIRIES
(404) 676-5766
ANNUAL REPORT REQUESTS
(800) 438-2653
-71-