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[COCA-COLA ENTERPRISES INC. LOGO]
FORM 10-Q
QUARTERLY REPORT
FOR THE QUARTER ENDED JUNE 27, 2003
FILED PURSUANT TO SECTION 13
OF THE
SECURITIES EXCHANGE ACT OF 1934
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 27, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-09300
[COCA-COLA ENTERPRISES INC. LOGO]
(Exact name of registrant as specified in its charter)
DELAWARE 58-0503352
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 WINDY RIDGE PARKWAY, SUITE 700
ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
770-989-3000
(Registrant's telephone number, including area code)
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock.
452,456,711 SHARES OF $1 PAR VALUE COMMON STOCK AS OF AUGUST 4, 2003
================================================================================
COCA-COLA ENTERPRISES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED JUNE 27, 2003
INDEX
Page
----
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Income Statements for the Quarters
ended June 27, 2003 and June 28, 2002.......................... 1
Condensed Consolidated Income Statements for the Six Months
ended June 27, 2003 and June 28, 2002.......................... 2
Condensed Consolidated Balance Sheets as of June 27, 2003
and December 31, 2002.......................................... 3
Condensed Consolidated Statements of Cash Flows for the
Six Months ended June 27, 2003 and June 28, 2002............... 5
Notes to Condensed Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 30
Item 4. Controls and Procedures.......................................... 30
Part II - Other Information
Item 1. Legal Proceedings................................................ 31
Item 6. Exhibits and Reports on Form 8-K................................. 31
Signatures............................................................... 33
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED; IN MILLIONS EXCEPT PER SHARE DATA)
QUARTER ENDED
-------------------
JUNE 27, JUNE 28,
2003 2002
-------- --------
NET OPERATING REVENUES ................................. $4,617 $4,234
Cost of sales, transactions with The
Coca-Cola Company $1,206 and $1,106, respectively ..... 2,690 2,471
-------- --------
GROSS PROFIT ........................................... 1,927 1,763
Selling, delivery, and administrative expenses ......... 1,399 1,271
------ ------
OPERATING INCOME ....................................... 528 492
Interest expense, net .................................. 156 166
Other nonoperating income, net ......................... 2 2
------ ------
INCOME BEFORE INCOME TAXES ............................. 374 328
Income tax expense ..................................... 114 113
------ ------
NET INCOME ............................................. 260 215
Preferred stock dividends .............................. 1 1
------ ------
NET INCOME APPLICABLE TO COMMON SHAREOWNERS ............ $ 259 $ 214
====== ======
BASIC NET INCOME PER SHARE APPLICABLE TO COMMON
SHAREOWNERS........................................... $ 0.57 $ 0.48
====== ======
DILUTED NET INCOME PER SHARE APPLICABLE TO COMMON
SHAREOWNERS........................................... $ 0.56 $ 0.47
====== ======
DIVIDENDS PER SHARE APPLICABLE TO COMMON SHAREOWNERS ... $ 0.04 $ 0.04
====== ======
See Notes to Condensed Consolidated Financial Statements.
- 1 -
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED; IN MILLIONS EXCEPT PER SHARE DATA)
SIX MONTHS ENDED
-------------------
JUNE 27, JUNE 28,
2003 2002
-------- --------
NET OPERATING REVENUES ................................. $8,284 $7,700
Cost of sales, transactions with The
Coca-Cola Company $2,138 and $2,011, respectively ..... 4,838 4,533
------ ------
GROSS PROFIT ........................................... 3,446 3,167
Selling, delivery, and administrative expenses ......... 2,740 2,495
------ ------
OPERATING INCOME ....................................... 706 672
Interest expense, net .................................. 296 329
Other nonoperating income, net ......................... 6 2
------ ------
INCOME BEFORE INCOME TAXES ............................. 416 345
Income tax expense ..................................... 128 119
------ ------
NET INCOME ............................................. 288 226
Preferred stock dividends .............................. 2 2
------ ------
NET INCOME APPLICABLE TO COMMON SHAREOWNERS ............ $ 286 $ 224
====== ======
BASIC NET INCOME PER SHARE APPLICABLE TO COMMON
SHAREOWNERS .......................................... $ 0.63 $ 0.50
====== ======
DILUTED NET INCOME PER SHARE APPLICABLE TO COMMON
SHAREOWNERS .......................................... $ 0.62 $ 0.49
====== ======
DIVIDENDS PER SHARE APPLICABLE TO COMMON SHAREOWNERS ... $ 0.08 $ 0.08
====== ======
See Notes to Condensed Consolidated Financial Statements.
- 2 -
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
JUNE 27, DECEMBER 31,
ASSETS 2003 2002
----------- ------------
(Unaudited)
CURRENT
Cash and cash investments, at cost
approximating market.............................. $ 135 $ 68
Trade accounts receivable, less allowance
reserves of $53 and $60, respectively ............ 2,011 1,661
Amounts receivable from The Coca-Cola
Company, net ..................................... -- 20
Inventories:
Finished goods ................................... 562 464
Raw materials and supplies ....................... 278 255
------- -------
840 719
Current deferred income tax assets ................. 56 51
Prepaid expenses and other current assets .......... 322 325
------- -------
Total Current Assets ........................... 3,364 2,844
PROPERTY, PLANT, AND EQUIPMENT
Land ............................................... 435 424
Buildings and improvements ......................... 1,953 1,869
Machinery and equipment ............................ 10,220 9,552
------- -------
12,608 11,845
Less allowances for depreciation ................... 6,249 5,638
------- -------
6,359 6,207
Construction in progress ........................... 153 186
------- -------
Net Property, Plant, and Equipment .............. 6,512 6,393
GOODWILL ............................................. 578 578
LICENSE INTANGIBLE ASSETS ............................ 13,749 13,450
LONG-TERM CUSTOMER CONTRACTS AND OTHER
NONCURRENT ASSETS................................... 1,157 1,110
------- -------
$25,360 $24,375
======= =======
See Notes to Condensed Consolidated Financial Statements.
- 3 -
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS EXCEPT SHARE DATA)
JUNE 27, DECEMBER 31,
LIABILITIES AND SHAREOWNERS' EQUITY 2003 2002
----------- ------------
(Unaudited)
CURRENT
Accounts payable and accrued expenses ........... $ 2,701 $ 2,588
Amounts due The Coca-Cola Company, net .......... 67 --
Deferred cash payments from
The Coca-Cola Company ......................... 84 80
Current portion of long-term debt ............... 1,190 787
-------- --------
Total Current Liabilities ................... 4,042 3,455
LONG-TERM DEBT, LESS CURRENT MATURITIES ........... 10,940 11,236
RETIREMENT AND INSURANCE PROGRAMS AND OTHER
LONG-TERM OBLIGATIONS ........................... 1,471 1,372
DEFERRED CASH PAYMENTS FROM THE COCA-COLA COMPANY . 382 426
LONG-TERM DEFERRED INCOME TAX LIABILITIES ......... 4,695 4,539
SHAREOWNERS' EQUITY
Preferred stock ................................ 37 37
Common stock, $1 par value - Authorized -
1,000,000,000 shares; Issued - 460,888,440 and
458,215,369 shares, respectively ............. 461 458
Additional paid-in capital ..................... 2,602 2,581
Reinvested earnings ............................ 889 639
Accumulated other comprehensive income (loss) .. (26) (236)
Common stock in treasury, at cost - 8,521,637
and 8,515,072 shares, respectively............ (133) (132)
-------- --------
Total Shareowners' Equity .................. 3,830 3,347
-------- --------
$ 25,360 $ 24,375
======== ========
See Notes to Condensed Consolidated Financial Statements.
- 4 -
COCA-COLA ENTERPRISES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN MILLIONS)
SIX MONTHS ENDED
----------------------
JUNE 27, JUNE 28,
2003 2002
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................... $ 288 $ 226
Adjustments to reconcile net income to net cash
derived from operating activities:
Depreciation ..................................... 510 467
Amortization ..................................... 44 38
Deferred income tax expense ...................... 87 83
Deferred cash payments from The Coca-Cola
Company ........................................ (41) (36)
Net changes in current assets and current
liabilities ................................... (273) (105)
Other ............................................ 7 8
------- -------
Net cash derived from operating activities ......... 622 681
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in capital assets ...................... (460) (375)
Proceeds from fixed asset disposals, $58 from
The Coca-Cola Company in 2003 ................... 63 4
Cash investments in bottling operations, net of
cash acquired ................................... (13) --
Other investing activities ......................... (22) (22)
------- -------
Net cash used in investing activities .............. (432) (393)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in commercial paper ........ 24 (558)
Issuances of debt .................................. 400 1,299
Payments on long-term debt ......................... (570) (958)
Cash dividend payments on common and preferred
stock ........................................... (20) (19)
Cash received from stock option exercises .......... 15 17
Cash received from settlement of interest rate
swap ............................................ 28 --
------- -------
Net cash used in financing activities .............. (123) (219)
------- -------
NET INCREASE IN CASH AND CASH INVESTMENTS ............. 67 69
Cash and cash investments at beginning of period.... 68 284
------- -------
CASH AND CASH INVESTMENTS AT END OF PERIOD ............ $ 135 $ 353
======= =======
See Notes to Condensed Consolidated Financial Statements.
- 5 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States (GAAP) for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments consisting of normal
recurring accruals considered necessary for a fair presentation have been
included. For further information, refer to the consolidated financial
statements and footnotes included in the Coca-Cola Enterprises Inc. (CCE) Annual
Report on Form 10-K for the year ended December 31, 2002.
NOTE B - EITF 02-16
Classifications in the 2002 income statement have been conformed to
classifications used in the current year under Emerging Issues Task Force (EITF)
No. 02-16, "Accounting by a Customer (Including a Reseller) for Cash
Consideration Received from a Vendor."
Upon adoption of EITF 02-16 in the first quarter of 2003, we classified the
following amounts in the 2002 income statement as reductions in cost of sales:
approximately $226 million and $415 million of direct marketing support from
TCCC and other licensors previously included in net operating revenues, and
approximately $23 million and $36 million of cold drink equipment placement
funding from TCCC previously included as a reduction in selling, delivery, and
administrative expenses for the quarter and six months ended June 28, 2002,
respectively. We also classified in net operating revenues $12 million and $25
million of net payments for dispensing equipment repair services received from
TCCC, previously included in selling, delivery, and administrative expenses for
the quarter and six months ended June 28, 2002, respectively.
NOTE C - SEASONALITY OF BUSINESS
Operating results for the second quarter and six months ended June 27, 2003 are
not indicative of results that may be expected for the year ending December 31,
2003 because of business seasonality. Business seasonality results from a
combination of higher unit sales of our products in the second and third
quarters versus the first and fourth quarters of the year and the methods of
accounting for fixed costs such as depreciation, amortization, and interest
expense which are not significantly impacted by business seasonality.
- 6 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - INCOME TAXES
Our effective tax rates for the first six months of 2003 and 2002 were
approximately 31% and 35%, respectively. The tax rate for the first six months
of 2003 was reduced by the benefit of the favorable settlement of various income
tax related items reducing income tax expense by approximately $7 million in
second-quarter 2003. A reconciliation of the income tax provisions at the
statutory federal rate to our actual income tax provisions follows (in
millions):
SIX MONTHS ENDED
-----------------------
JUNE 27, JUNE 28,
2003 2002
-------- --------
U.S. federal statutory expense ..................... $ 146 $ 120
State expense, net of federal expense .............. 7 3
Impact of lower taxes on European and Canadian
operations, net .................................. (27) (16)
Valuation allowance provision ...................... 3 4
Nondeductible items ................................ 6 5
Settlement of tax items ............................ (7) --
Other, net ......................................... -- 3
----- -----
$ 128 $ 119
===== =====
NOTE E - LONG-TERM DEBT
Total long-term debt balances summarized below are adjusted for the effects of
interest rate and currency swap agreements (in millions):
JUNE 27, DECEMBER 31,
2003 2002
-------- ------------
U.S. dollar commercial paper (weighted average
rates of 1.1% and 1.4%) ........................... $ 1,391 $ 1,415
Euro commercial paper (weighted average rates of
2.4% and 3.0%) .................................... 229 242
Canadian dollar commercial paper (weighted average
rates of 3.3% and 2.8%) ........................... 203 87
U.S. dollar notes due 2004-2037 (weighted average
rate of 3.5%) ..................................... 4,082 4,059
Euro and pound sterling notes due 2003-2021
(weighted average rates of 5.9% and 6.5%)(A) ...... 1,409 1,498
Canadian dollar notes due 2003-2009 (weighted
average rates of 5.1% and 4.7%)(B) ................ 529 536
U.S. dollar debentures due 2012-2098 (weighted
average rate of 7.4%) ............................. 3,783 3,783
8.35% U.S. dollar zero coupon notes due 2020 (net
of unamortized discount of $472 and $478) ......... 157 151
Various foreign currency debt arrangements(A) ........ 274 172
Additional debt ...................................... 73 80
------- -------
Total long-term debt .......................... $12,130 $12,023
======= =======
- 7 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E - LONG-TERM DEBT (CONTINUED)
(A) In May 2003, a British pound sterling note of approximately $276 million
matured and approximately $276 million in British pound sterling
borrowings were issued. In February 2003, approximately $157 million in
Eurobonds matured; short-term borrowings of approximately $283 million
were issued and used to pay off debt. In January 2003, approximately $27
million of French franc notes matured.
(B) In March 2003, approximately $65 million in Canadian dollar notes matured.
At June 27, 2003 and December 31, 2002, approximately $2.3 billion of borrowings
due in the next 12 months, including commercial paper balances outstanding, are
classified as maturing after one year due to our intent and ability through our
credit facilities to refinance these borrowings on a long-term basis.
At June 27, 2003 and December 31, 2002, we had $3.2 billion of amounts available
under domestic and international credit facilities. These facilities serve as
back-up to our domestic and international commercial paper programs and support
working capital needs. At June 27, 2003 and December 31, 2002, we had $171
million and $53 million, respectively, of short-term borrowings outstanding
under domestic and international credit facilities.
At August 8, 2003, we had $7.2 billion of amounts available under our public
debt facilities which could be used for long-term financing, refinancing of debt
maturities, and refinancing of commercial paper. At August 8, 2003, we had
available for issuance (i) $2.1 billion in debt securities
under a Euro Medium-Term Note Program, (ii) $1.4 billion ($2.0 billion Canadian)
in Canadian dollar debt securities under a Canadian Medium-Term Note Program,
and (iii) $3.7 billion available under registration statements with the
Securities and Exchange Commission. The registration statement we filed with the
Securities and Exchange Commission in October 2002 increased the amounts of
registered debt securities available for issuance by $3.5 billion when it
became effective in August 2003.
Aggregate maturities of long-term debt for the five twelve-month periods
subsequent to June 27, 2003 are as follows (in millions): 2004 - $1,190; 2005 -
$484; 2006 - $2,183; 2007 - $821; and 2008 - $797.
On March 31, 2003, we terminated a fixed-to-floating interest rate swap with a
notional amount of $150 million and received a payment of $28 million, equal to
the fair value of the hedge on the termination date. The swap was previously
designated as a fair value hedge of a fixed rate debt instrument due September
30, 2009. The fair value settlement will be amortized over the remaining term of
the debt using the effective interest method, thereby decreasing the interest
expense on that previously hedged debt over the remaining term.
The credit facilities and outstanding notes and debentures contain various
provisions that, among other things, require us to maintain a defined leverage
ratio and limit the incurrence of certain liens or encumbrances in excess of
defined amounts. These requirements currently are not, and it is not anticipated
they will become, restrictive to our liquidity or capital resources.
- 8 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE F - PREFERRED STOCK
When we acquired Great Plains Bottlers and Canners, Inc. in 1998, we issued
401,528 shares of $1 par value voting convertible preferred stock ("Great Plains
Series"). As of June 27, 2003, 35,000 shares had been converted into 154,778
shares of our common stock. The mandatory conversion date for the Great Plains
series was August 7, 2003. On that date, the remaining 366,528 shares of the
Great Plains series were converted into 2,119,518 million common stock shares.
NOTE G - STOCK-BASED COMPENSATION PLANS
We granted approximately 7.9 million service-vested stock options to certain
executive and management level employees during the first six months of 2003.
These options vest over a period of 3 years and expire 10 years from the date of
grant. All of the options were granted at an exercise price equal to the fair
market value of the stock on the grant date.
We also granted 1.24 million shares of restricted stock and 77,000 restricted
stock units to certain employees during the first six months of 2003. These
awards vest upon continued employment for a period of at least 3 years.
An aggregate of 1.4 million shares of common stock were issued during the first
six months of 2003 from the exercise of stock options.
We apply APB Opinion No. 25 and related interpretations in accounting for our
stock-based compensation plans. FAS 123, if fully adopted, would change the
method for cost recognition on our stock-based compensation plans.
- 9 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE G - STOCK-BASED COMPENSATION PLANS (CONTINUED)
The following table illustrates the effect of stock-based employee compensation
costs on reported net income applicable to common shareowners and also
illustrates the effect on reported net income applicable to common shareowners
and earnings per share as if compensation cost for our grants under stock-based
compensation plans had been determined under FAS 123, for the quarters and six
months ended June 27, 2003 and June 28, 2002 (in millions, except per share
data):
QUARTER ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
2003 2002 2003 2002
-------- --------- -------- --------
Net income applicable to
common shareowners before
effects of stock-based
employee compensation costs
included in net income,
net of tax ................... $ 261 $ 215 $ 290 $ 227
Deduct: Total stock-based
employee compensation
expense, net of tax,
included in net income
applicable to common
shareowners .................. (2) (1) (4) (3)
----- ----- ----- -----
Net income applicable to
common shareowners, as
reported ..................... 259 214 286 224
Deduct: Incremental
stock-based employee
compensation expense
determined under fair
value based method
for all awards, net of
tax .......................... (16) (13) (31) (22)
----- ----- ----- -----
Pro forma net income
applicable to common
shareowners .................. $ 243 $ 201 $ 255 $ 202
===== ===== ===== =====
Net income per share
applicable to common
shareowners:
Basic - as reported ........ $0.57 $0.48 $0.63 $0.50
===== ===== ===== =====
Basic - pro forma .......... $0.54 $0.45 $0.57 $0.45
===== ===== ===== =====
Diluted - as reported ...... $0.56 $0.47 $0.62 $0.49
===== ===== ===== =====
Diluted - pro forma ........ $0.53 $0.44 $0.56 $0.44
===== ===== ===== =====
- 10 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE H - DERIVATIVES
We use certain risk management instruments to manage our interest rate and
foreign exchange exposures. These instruments are accounted for as fair value
and cash flow hedges, as appropriate, under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended.
We enter into certain nonfunctional currency borrowings to hedge net investments
in international subsidiaries. During the first six months of 2003, the net
amount recorded in comprehensive income (loss) related to these borrowings was a
loss of approximately $53 million.
NOTE I - RELATED PARTY TRANSACTIONS
The following table presents the impact of transactions with The Coca-Cola
Company (TCCC) in millions for the periods presented:
QUARTER ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
2003 2002 2003 2002
-------- -------- -------- --------
Amounts affecting net
operating revenues:
Fountain syrup and
packaged product sales ..... $ 130 $ 100 $ 231 $ 185
Dispensing equipment
repair services ............ 15 12 27 25
Other transactions ........... 4 1 8 2
------- ------- ------- -------
$ 149 $ 113 $ 266 $ 212
======= ======= ======= =======
Amounts affecting cost of sales:
Purchases of syrup and
concentrate ................ $(1,231) $(1,126) $(2,190) $(2,049)
Purchases of sweetener ....... (84) (88) (156) (161)
Purchases of finished
products ................... (140) (127) (259) (226)
Marketing support
funding earned ............. 225 212 418 389
Cold drink equipment
placement funding earned ... 24 23 41 36
Cost recovery from sale
of hot fill production
facility ................... -- -- 8 --
------- ------- ------- -------
$(1,206) $(1,106) $(2,138) $(2,011)
======= ======= ======= =======
Amounts affecting selling,
delivery, and
administrative expenses:
Marketing programs ........... $ 1 $ -- $ 1 $ --
Operating expense
reimbursements:
Payable to TCCC ............ (4) (5) (8) (9)
Due from TCCC .............. 9 8 18 17
------- ------- ------- -------
$ 6 $ 3 $ 11 $ 8
======= ======= ======= =======
- 11 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE I - RELATED PARTY TRANSACTIONS (CONTINUED)
Of the $200 million available to be earned by us in 2003 under the Sales Growth
Initiative (SGI) agreement with TCCC,$30 million is being recognized as sales
are achieved. The remaining $170 million "Volume Growth Funding" is earned by
attaining mutually established sales volume growth targets for brands owned
by The Coca-Cola Company. The annual and quarterly target minimums are
established for each program year through mutual agreement with TCCC. Sales
volume growth is determined through a formula with adjustments based on
expected sales volume for brand conversions, brand acquisitions, and new
brand introductions. The SGI agreement provides for penalties of $1 per
equivalent case if these minimum targets are not met. We currently expect to
earn $130 million of the $170 million "Volume Growth Funding" available to us
under the SGI agreement.
In applying the terms of the SGI agreement to our volume performance for
the first six months of 2003, we recognized approximately $35 million and
$77 million of the 2003 Volume Growth Funding in the second quarter and
first six months of 2003, respectively. Six month 2003 target minimums
were not achieved resulting in an accrual of $8 million for penalties to be
offset against future funding commitments.
We participate in cooperative trade marketing arrangements (CTM) for the U.S.
Coca-Cola system administered by TCCC. Beginning in 2002, we became responsible
for all costs of the program in our territories, except for a limited number of
specified customers. We transfer amounts to TCCC under the program for payment
to customers. Pursuant to these arrangements, amounts paid or payable to TCCC
for the six months ended June 27, 2003 totaled approximately $130 million.
NOTE J - GEOGRAPHIC OPERATING INFORMATION
We operate in one industry: the marketing, distribution, and production of
liquid nonalcoholic refreshments. On June 27, 2003, we operated in 46 states in
the United States, the District of Columbia, all 10 provinces of Canada
(collectively referred to as the "North American" territories), and in Belgium,
continental France, Great Britain, Luxembourg, Monaco, and the Netherlands
(collectively referred to as the "European" territories).
The following presents net operating revenues for the six months ended June 27,
2003 and June 28, 2002 and long-lived assets as of June 27, 2003 and December
31, 2002 by geographic territory (in millions):
2003 2002
-------------------- -----------------------
NET LONG- NET LONG-
OPERATING LIVED OPERATING LIVED
REVENUES ASSETS REVENUES(B) ASSETS
-------- ------ ----------- ------
North American ............... $ 6,048 $17,073 $ 5,935 $16,918
European(A) .................. 2,236 4,923 1,765 4,613
------- ------- ------- -------
Consolidated ................. $ 8,284 $21,996 $ 7,700 $21,531
======= ======= ======= =======
We have no material amounts of sales or transfers between our North American and
European territories and no significant United States export sales.
(A) Great Britain contributed approximately 47% and 49% of European net
operating revenues for the first six months of 2003 and 2002,
respectively, and at June 27, 2003 and December 31, 2002, approximately
63% and 65%, respectively, of European long-lived assets.
- 12 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE J - GEOGRAPHIC OPERATING INFORMATION (CONTINUED)
(B) To conform to the current year presentation, approximately $334 million
and $81 million of marketing support in North America and Europe,
respectively, previously included in net operating revenues have been
classified as reductions of cost of sales and $25 million of payments
for dispensing equipment repair services in North America previously
included in selling, delivery, and administrative expenses have been
classified as net operating revenues under EITF 02-16.
NOTE K - RESTRUCTURING AND OTHER CHARGES
At December 31, 2002, the amount remaining to be paid for restructuring charges
recognized for North America in 2001 and Great Britain in 2002 was $17 million.
We made payments during the first six months of 2003 totaling $8 million. The
remaining balance of $9 million at June 27, 2003 represents remaining severance
benefits to be paid.
NOTE L - EARNINGS PER SHARE
The following table presents information concerning basic and diluted earnings
per share (in millions except per share data; per share data is calculated prior
to rounding to millions):
QUARTER ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
2003 2002 2003 2002
-------- -------- -------- --------
Net income ...................... $ 260 $ 215 $ 288 $ 226
Preferred stock dividends........ 1 1 2 2
------ ------ ------ ------
Net income applicable to
common shareowners ............ $ 259 $ 214 $ 286 $ 224
====== ====== ====== ======
Basic average common
shares outstanding ............ 453 449 453 448
Effect of dilutive
securities:
Stock compensation
awards .................... 6 9 7 8
------ ------ ------ ------
Diluted average common
shares outstanding ........... 459 458 460 456
====== ====== ====== ======
Basic net income per
share applicable to
common shareowners ........... $ 0.57 $ 0.48 $ 0.63 $ 0.50
====== ====== ====== ======
Diluted net income per
share applicable
to common shareowners ........ $ 0.56 $ 0.47 $ 0.62 $ 0.49
====== ====== ====== ======
The Great Plains Series preferred stock, detailed in Note F, is not included in
our computation of diluted earnings per share in 2003 or 2002 because the effect
would be antidilutive.
- 13 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE M - COMPREHENSIVE INCOME (LOSS)
The following table (in millions) presents a calculation of comprehensive income
(loss), comprised of net income and other adjustments. Other adjustments include
minimum pension liability adjustments as defined by FAS 87, currency items such
as foreign currency translation adjustments and hedges of net investments in
international subsidiaries, unrealized gains and losses on certain investments
in debt and equity securities, changes in the fair value of certain derivative
financial instruments qualifying as cash flow hedges, and minimum pension
liability adjustments, where applicable. We adjust for the income tax effect on
all currency items excluding the impact of currency translations as earnings
from subsidiaries domiciled outside of the U.S. are determined to be
indefinitely reinvested.
QUARTER ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
2003 2002 2003 2002
-------- -------- --------- --------
Net income ..................... $ 260 $ 215 $ 288 $ 226
Currency translations .......... 135 77 272 42
Hedges of net investments,
net of tax ................... (26) (34) (53) (16)
Unrealized gains (losses)
on securities, net of tax .... 2 (2) (4) 3
Realized gains on
securities included in
net income, net of tax ....... -- -- (2) --
Unrealized (losses) gains
on cash flow hedges,
net of tax ................... -- (9) 5 (5)
Realized (losses) gains
on cash flow hedges,
net of tax ................... (1) 6 (8) 3
----- ----- ----- -----
Net change to derive
comprehensive income
(loss) for the period ........ 110 38 210 27
----- ----- ----- -----
Comprehensive income (loss) .... $ 370 $ 253 $ 498 $ 253
===== ===== ===== =====
- 14 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE N - COMMITMENTS AND CONTINGENCIES
The following presents amounts owed by third parties we guarantee and amounts
outstanding on these guarantees as of June 27, 2003 and December 31, 2002:
AMOUNTS GUARANTEED AMOUNTS OUTSTANDING
---------------------- ----------------------
JUNE 27, DECEMBER 31, JUNE 27, DECEMBER 31,
CATEGORY EXPIRATION 2003 2002 2003 2002
-------- ---------- -------- ------------ -------- ------------
Manufacturing
cooperatives ...... 2014 $236 $236 $177 $138
Vending
partnership ....... Renewable 25 25 19 19
Other ............... Renewable 1 1 1 1
---- ---- ---- ----
$262 $262 $197 $158
==== ==== ==== ====
In North America, we guarantee repayment of indebtedness owed by PET (plastic)
bottle manufacturing cooperatives. We also guarantee repayment of indebtedness
owed by a vending partnership we have a limited partnership interest in.
We hold no assets as collateral against these guarantees and no contractual
recourse provisions exist under the guarantees that would enable us to recover
amounts we guarantee, in the event of an occurrence of a triggering event under
these guarantees. These guarantees arose as a result of our ongoing business
relationships. No amounts are recorded for our obligations under these
guarantees as we consider the risk of default associated with these guarantees
to be remote.
In addition, we have issued letters of credit as collateral for claims incurred
under self-insurance programs for workers' compensation and large deductible
casualty insurance programs aggregating $318 million and letters of credit
provided for operating activities aggregating $5 million.
Our business practices are being reviewed by the European Commission in various
jurisdictions for alleged abuses of an alleged dominant position under Article
82 of the EU Treaty. We do not believe we have a dominant position in the
relevant markets, or that our current or past commercial practices violate EU
law. Nonetheless, the Commission has considerable discretion in reaching
conclusions and levying fines, which are subject to judicial review. The
Commission has not notified us when it might reach any conclusions.
Our California subsidiary has been sued by several current and former employees
over alleged violations of state wage and hour rules. Our California subsidiary
is defending against the claims vigorously but at this time it is not possible
to predict the outcome.
- 15 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE N - COMMITMENTS AND CONTINGENCIES (CONTINUED)
In 2000, CCE and TCCC were found by a Texas jury to be jointly liable in a
combined amount of $15.2 million to five plaintiffs, each a distributor of
competing beverage products. These distributors sued alleging that CCE and TCCC
engaged in unfair marketing practices. The trial court's verdict was upheld by
the Texas Court of Appeals in July 2003; we and TCCC will apply to the Texas
Supreme Court for leave to appeal to that court. We believe our reserves are
adequate to cover the damages awarded by the trial court if its verdict is
allowed to stand. The claims of the three remaining plaintiffs in this case
remain to be tried and four additional competitors have filed similar claims
against us. We have not provided for any potential awards under these
additional claims. We intend to defend against these claims vigorously.
On June 20, 2003 Riverwood International Corporation filed a patent infringement
suit against MeadWestvaco Corporation in the United States District Court for
the Northern District of Georgia. We currently hold a multi-year supply
contract with MeadWestvaco for the supply of certain 12-can multipack
paperboard cartons known as the "fridge pack." Riverwood's suit seeks a
preliminary injunction enjoining MeadWestvaco from supplying us with fridge
pack packaging. MeadWestvaco has denied the material allegations of
Riverwood's complaint and has opposed the preliminary injunction. We have
intervened in the action to oppose the preliminary injunction, and a hearing on
the injunction is scheduled on September 4, 2003. We are unable to predict the
court's disposition of the motion for a preliminary injunction, but we have
taken measures to assure that we will have sufficient packaging available for
our cans in the unlikely event a preliminary injunction is granted.
In addition to these cases outlined above, we are a defendant in various other
matters of litigation generally arising out of the normal course of business.
Although it is difficult to predict the ultimate outcome of litigation matters,
management believes, based on discussions with counsel, that any ultimate
liability would not materially affect our financial position or liquidity.
We recognize funding previously received under the Jumpstart programs with TCCC
as cold drink equipment is placed and over the period we have the potential
requirement to move equipment. Under the programs, we agree to certain
performance and reporting provisions. Should provisions of the program not be
satisfied, and alternative solutions not be agreed upon, the contract allows
TCCC to pursue a partial refund of amounts previously paid. No refunds have ever
been paid under this program, and we believe the probability of a partial refund
of amounts previously paid under the program is remote. We believe we would in
all cases resolve any matters that might arise with TCCC.
Under the Sales Growth Initiative (SGI) agreement with TCCC, we are to
receive $170 million of "Volume Growth Funding" in 2003 which is to be earned
by attaining mutually established sales volume growth targets for brands owned
by The Coca-Cola Company. The annual and quarterly target minimums are
established for each program year through mutual agreement with TCCC based on
expected sales volume. The SGI agreement provides for penalties of $1 per
equivalent case if these minimum targets are not met. Under the
SGI agreement, quarterly funding commitments are advanced at the
beginning of each quarter less penalties from any year-to-date shortfall
to targets.
- 16 -
COCA-COLA ENTERPRISES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE N - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Our tax filings are routinely subjected to audit by tax authorities in most
jurisdictions where we conduct business. These audits may result in assessments
of additional taxes that are subsequently resolved with the authorities or
potentially through the courts. Currently, there are assessments or audits which
may lead to assessments involving certain of our subsidiaries, including
subsidiaries in Canada and France, that may not be resolved in the foreseeable
future. We believe we have substantial defenses to the questions being raised
and intend to pursue all legal remedies available if we are unable to reach a
resolution with the authorities. We believe we have adequately provided for any
ultimate amounts that would result from these proceedings, however, it is too
early to predict a final outcome in these matters.
We have filed suit against two of our insurers to recover losses incurred in
connection with the 1999 European product recall. We are unable to predict the
final outcome of this action at this time.
- 17 -
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS SUMMARY AND OBJECTIVES
Coca-Cola Enterprises Inc. (CCE) is the world's largest marketer, producer, and
distributor of products of The Coca-Cola Company (TCCC). We also distribute
other beverage brands in select territories. We operate in 46 states in the
United States, the District of Columbia, all 10 provinces of Canada, and in
portions of Europe, including Belgium, continental France, Great Britain,
Luxembourg, Monaco, and the Netherlands.
OUTLOOK
We expect operating income in a range of $1.43 billion to $1.48 billion in 2003
compared to operating income of $1.36 billion in 2002. Reported net income
applicable to common shareowners for full-year 2003 is expected to total
approximately $540 million to $570 million, compared to reported net income
applicable to common shareowners of $491 million in 2002. Reported earnings per
diluted common share are expected to grow to a range of $1.17 to $1.24 in 2003,
including favorable tax items totaling $0.02 per share realized in the first six
months of 2003. This compares to 2002 reported earnings per diluted common share
of $1.07, including tax benefits of $0.04 that resulted from rate changes and a
revaluation of income tax obligations. We continue to expect overall capital
spending in 2003 to total approximately $1.1 billion. Consolidated full-year
sales volume is expected to grow 1% in 2003.
In the second quarter of 2003, we acquired the production and distribution
facilities of Chaudfontaine, a Belgian water brand. At the same time, TCCC
acquired the Chaudfontaine water source and brand. Total acquisition cost for
both TCCC and CCE was $31 million in cash and assumed debt. Our portion of the
acquisition cost was $16 million in cash and assumed debt. We also entered into
an agreement with TCCC to equally share the profits or losses from the sale of
Chaudfontaine products. We do not anticipate that Chaudfontaine will have a
significant impact on our 2003 results.
In second-quarter 2003, we continued implementation of our consolidation of
certain administrative, financial and accounting processes into a single shared
services center to support our North American business, a significant portion
of which will be completed in August 2003. This consolidation has resulted in
improved efficiencies, cost savings, enhanced consistency in practices, and
improved information delivery from common processes.
Project Pinnacle, our multi-year effort to redesign business processes and
implement the SAP software platform is progressing favorably in achieving our
objective of enhancing shareowner value by: (i) developing standard global
processes, (ii) increasing information capabilities, and (iii) providing system
flexibility. The project covers all functional areas of our business and is
staffed with representatives from both Europe and North America. Our first stage
of financial systems implementation will occur in Canada and certain parts of
France in fourth-quarter 2003 with complete roll-out of financial processes in
North America projected to occur in second-quarter 2004. We anticipate our
complete implementation will encompass a five-year period that began in 2002. We
completed negotiation and executed an updated agreement with SAP in July 2003.
Including the costs of our internal resources assigned to the project, we
project we will spend approximately $125 million in 2003, $80 million of which
will be capital costs. The estimated capital costs of this project total
approximately $215 million.
-18-
Management's Discussion and Analysis should be read in conjunction with our
accompanying unaudited condensed consolidated financial statements and the
accompanying footnotes along with the cautionary statements at the end of this
section.
RESULTS OF OPERATIONS
OVERVIEW
Our operating results in the second and third quarters of each year are
favorably impacted by the seasonality of our business. During the second quarter
of 2003, unseasonably cool and wet weather and resulting soft consumer spending
patterns contributed to a suppression of volume growth in North America.
However, net operating revenues did benefit from our continued focus on pricing
initiatives in both North America and Europe and favorable currency exchange
rate changes. Second-quarter 2003 currency-neutral bottle and can net price per
case increased 2-1/2% in North America and 2% in Europe over the same period
last year as explained further below.
For the second quarter of 2003, net income increased to $259 million, or $0.56
per diluted common share, including $0.02 per diluted common share from the
favorable resolution of tax items. This represents an increase of approximately
21% over net income of $214 million for the same quarter last year. Operating
income increased 7% over second-quarter 2002 results to $528 million for
second-quarter 2003, impacted by strong growth in our European operations and
favorable pricing results in both North America and Europe offset by suppressed
volume growth in North America. Second quarter results also benefited from the
settlement of promotion programs and accruals totaling $24 million in
second-quarter 2003, and $22 million in second-quarter 2002.
Under EITF 02-16, our income statements classify funding received from The
Coca-Cola Company and other licensors in cost of sales as earned. These amounts
were previously included in net operating revenues or as a reduction of selling,
delivery, and administrative expenses. Additionally, amounts we receive from
TCCC for dispensing equipment repair services are included in net operating
revenues.
We earn revenues from products when the product is delivered or when we collect
cash from vending machines. We earn funding from licensors as performance
measures are met. We earn service revenues for equipment maintenance and
production when services are performed.
We are applying EITF 02-16 to all existing programs and amounts within all
reported periods are classified consistently between periods. We classified as a
reduction in cost of sales approximately $226 million and $415 million of
marketing funding previously included in net operating revenues and
approximately $23 million and $36 million of cold drink equipment placement
funding previously included as a reduction in selling, delivery, and
administrative expenses for the second quarter and six month period ended June
28, 2002, respectively. We also classified in net operating revenues $12 million
and $25 million of dispensing equipment repair service revenues previously
included in selling, delivery, and administrative expenses for the second
quarter and six month period ended June 28, 2002, respectively.
-19-
NET OPERATING REVENUES AND COST OF SALES
Our second quarter 2003 net operating revenues increased 9% to $4.6 billion.
This increase was primarily a result of favorable currency exchange rate
movement (5%), an increase in pricing (2-1/2%), and improved volume (1-1/2%).
The percentage of consolidated revenues derived from our North American and
European groups was 72% and 28%, respectively. In the second quarter and
first half of 2003, Great Britain contributed approximately 47% of European
revenues.
We participate in various programs with customers to promote the sale of our
products. Among our programs with customers are arrangements under which
allowances may be earned by the customer for attaining agreed upon sales levels
and/or for participating in specific marketing programs. We also participate in
contractual arrangements providing us with pouring or vending rights in athletic
venues, school districts, or similar venues. Coupon programs and under-the-cap
promotions are also developed in various territories for the purpose of
increasing sales by all customers. The cost of these programs, included as
deductions in net operating revenues, totaled approximately $438 million and
$388 million for the quarters ended June 27, 2003 and June 28, 2002,
respectively. The increase in the cost of these programs is principally due to
an increase in volume attributable to key customers.
"Bottle and Can Net Pricing per Case" and "Currency Neutral Bottle and Can Net
Pricing per Case" are provided to assist in evaluation of bottle and can pricing
trends in the marketplace and distinguish the impact of foreign currency
exchange rate changes to our operations. Bottle and can net price per case is
the invoice price charged to customers reduced by promotional allowances. Our
bottle and can sales accounted for 92% of our net revenue in the first half of
2003. The following table presents the reconciliation of these measures to the
change in net revenues per case for the second quarter and the first six months
of 2003. All per case percentage changes are rounded to the nearest 1/2% and
are based on wholesale physical case volume.
SECOND-QUARTER 2003 CHANGE FIRST SIX-MONTHS 2003 CHANGE
---------------------------- ----------------------------
NORTH NORTH
TOTAL AMERICA EUROPE TOTAL AMERICA EUROPE
------- ------- -------- ------- ------- --------
Change in Net
Revenues per Case.. 7% 2 1/2% 19 1/2% 5 1/2% 2% 18%
Impact of excluding
post-mix sales
and agency
sales ............ 1/2 1/2 1 1 1/2 1
------ ------ ------- ------ ------ -------
BOTTLE AND CAN NET
PRICING PER CASE .. 7 1/2 3 20 1/2 6 1/2 2 1/2 19
Impact of currency
exchange rate
changes.......... (5) (1/2) (18 1/2) (4 1/2) (1/2) (17 1/2)
------ ------ ------- ------ ------ -------
CURRENCY NEUTRAL
BOTTLE AND CAN
NET PRICING PER
CASE.............. 2 1/2% 2 1/2% 2% 2% 2% 1 1/2%
====== ====== ======= ====== ====== =======
Second quarter 2003 consolidated bottle and can net price per case increased
7-1/2% from the same quarter last year. On a currency-neutral basis, this
increase was 2-1/2%. Bottle and can net pricing per case, excluding the impact
of currency exchange rate changes, increased 2-1/2% in North America and 2% in
Europe for the quarter. These increases were due to our continued commitment to
pricing initiatives in both North America and Europe.
"Bottle and Can Cost of Sales per Case" and "Currency Neutral Bottle and Can
Cost of Sales per Case" are provided to assist in evaluating cost trends for
bottle and can products and to distinguish the impact of foreign currency
exchange rate changes to our operations. These
-20-
measures exclude the impact of fountain ingredient costs, as well as marketing
credits and Jumpstart funding in order to isolate the change in bottle and can
ingredient and packaging costs. The following table presents the reconciliation
between these measures and change in cost of sales per case for the second
quarter and the first six months of 2003. All per case percentage changes are
rounded to the nearest 1/2% and are based on wholesale physical case volume.
SECOND-QUARTER 2003 CHANGE FIRST SIX-MONTHS 2003 CHANGE
---------------------------- ----------------------------
NORTH NORTH
TOTAL AMERICA EUROPE TOTAL AMERICA EUROPE
------- ------- -------- ------- ------- --------
Change in Cost
of Sales per Case.. 6 1/2% 1 1/2% 19 1/2% 5% --% 17 1/2%
Impact of excluding
bottle and can
marketing credits
and Jumpstart
funding......... (1/2) (1/2) -- -- -- --
Impact of excluding
post-mix sales and
agency sales.... 1 1/2 1/2 1 1 1/2
------ ----- ------- ----- ----- -------
BOTTLE AND CAN
COST OF SALES
PER CASE.......... 7 1 1/2 20 6 1 18
Impact of
currency exchange
rate changes.... (5 1/2) (1/2) (18 1/2) (5) (1/2) (17 1/2)
------ ----- ------- ----- ----- -------
CURRENCY NEUTRAL
BOTTLE AND CAN
COST OF SALES
PER CASE.......... 1 1/2% 1% 1 1/2% 1% 1/2% 1/2%
====== ===== ======= ===== ===== =======
Consolidated cost of sales per case increased 1-1/2% over the second quarter of
2002 on a currency-neutral basis. Our bottle and can cost of sales per case, on
a currency-neutral basis, has increased 1% in North America and 1-1/2% in Europe
from the second quarter of 2002 to the second quarter of 2003. For the first
half of the year, our bottle and can cost of sales per case has increased 1/2%
in both North America and Europe, excluding the impact of currency exchange rate
changes. For 2003, we expect concentrate prices to increase 1% in North America
and 2% in Europe.
VOLUME
Comparable volume results, as adjusted for one less selling day in the first
quarter of 2003 and the acquisition of Chaudfontaine in the second quarter of
2003, are reconciled to volume changes for the second-quarter and first
six-month period of 2003 in the following table:
SECOND-QUARTER 2003 CHANGE FIRST SIX-MONTHS 2003 CHANGE
---------------------------- ----------------------------
NORTH NORTH
TOTAL AMERICA EUROPE TOTAL AMERICA EUROPE
------- ------- -------- ------- ------- --------
Change in Volume... 2% --% 8 1/2% 2% --% 7 1/2%
Impact of
acquisitions.... 1/2 -- (1) (1/2) -- (1)
Impact of selling
day shift....... -- -- -- 1/2 1/2 1/2
------ ---- ------ ---- ---- ------
COMPARABLE BOTTLE
AND CAN VOLUME.... 1 1/2% --% 7 1/2% 2% 1/2% 6 1/2%
====== ==== ====== ==== ==== ======
Comparable volume growth for the first six months of 2003 is adjusted for a
one-day reduction in the number of selling days in the first six months of 2002
to equal the same number of days as the first six months of 2003. Comparable
volume computations for both the second quarter and the first six months of 2003
are adjusted by eliminating the additional volume from the purchase of
Chaudfontaine in second-quarter 2003.
-21-
Consolidated comparable bottle and can volume for the second quarter of 2003
increased 1-1/2% over the same quarter last year. North American volume for the
quarter was even with volume in the second quarter of 2002. Volume hurdles from
second quarter 2002 brand innovations and our continued commitment to pricing
initiatives contributed to the suppression of volume growth. Strong volume
increases in Belgium, Great Britain, and France contributed to comparable volume
growth in Europe of 7-1/2%. The shift of the Easter holiday from the first
quarter in 2002 to the second quarter in 2003 positively impacted second quarter
2003 volume by approximately 1%; accordingly, without this impact comparable
volume growth would have been approximately 1/2% for second quarter 2003.
Second quarter volume performance in North America was suppressed as
contributions from Vanilla Coke, diet Vanilla Coke, and Sprite Remix were offset
by slower sales of flavored carbonated soft drinks and noncarbonated beverages
impacted by marketing factors including our pricing efforts and suppressed
consumer demand because of unfavorable market conditions. Full-year North
American volume is expected to decrease slightly or remain essentially flat.
Second quarter 2003 European volume benefited from introductions of diet Coke
with Lemon, Coke Light with Lemon, Vanilla Coke, and diet Vanilla Coke over the
past year. Carbonated soft-drink volume for second quarter 2003 in Europe
increased approximately 8% over second quarter 2002. European volume is
expected to grow 4% to 6% for full year 2003.
SELLING, DELIVERY, AND ADMINISTRATIVE EXPENSES
The following table presents selling, delivery, and administrative expenses as a
percentage of net operating revenues for the periods presented (in millions):
QUARTER ENDED SIX MONTHS ENDED
--------------------- ---------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
2003 2002 2003 2002
-------- -------- -------- --------
Selling, Delivery, and
Administrative Expenses ..... $ 1,399 $ 1,271 $ 2,740 $ 2,495
Net Operating Revenues ....... $ 4,617 $ 4,234 $ 8,284 $ 7,700
Selling, Delivery, and
Administrative Expenses
as a percentage of Net
Operating Revenues .......... 30.3% 30.0% 33.1% 32.4%
Selling, delivery, and administrative expenses increased approximately 10% for
both the quarter and six months ended June 27, 2003, 3.5% due to exchange rate
changes, with the remainder due primarily to spending on the introduction of
Vanilla Coke in Europe and fuel costs in the first half of the year. We expect
slower growth of our selling, delivery, and administrative expenses for
the remainder of the year, resulting in an increase of less than 5% for
the full year on a currency-neutral basis.
Depreciation expense increased $18 million, from $237 million for the second
quarter of 2002 to $255 million for the second quarter of 2003. This increase is
due to higher capital expenditures in recent years and the effect of currency
exchange rate changes.
-22-
INTEREST EXPENSE
Net interest expense for the second quarter of 2003 decreased from the same
period of 2002 due to a decline in our weighted average cost of debt. The
weighted average interest rate for the first six month period of 2003 was 4.9%
compared to 5.5% for the first six months of 2002.
INCOME TAXES
Our effective tax rates for the first six months of 2003 and 2002 were 31% and
35%, respectively. The tax rate for the first six months of 2003 was reduced by
the benefit of the favorable settlement of various income tax related items
reducing income tax expense by approximately $7 million in the second quarter of
2003. Excluding this favorable tax settlement benefit, the effective tax rate
for 2003 is projected to be 32%. Our projected 2003 effective tax rate,
excluding the favorable settlement benefit in second quarter 2003, reflects
expected full-year 2003 pretax earnings combined with the beneficial tax impact
of certain international operations. Our effective tax rate for the remainder of
2003 is dependent upon operating results and may change if the results for the
year are different from current expectations.
TRANSACTIONS WITH THE COCA-COLA COMPANY
The following table presents the impact of transactions with TCCC in millions
for the periods presented:
QUARTER ENDED SIX MONTHS ENDED
--------------------- ---------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
2003 2002 2003 2002
-------- -------- -------- --------
Amounts affecting net
operating revenues:
Fountain syrup and
packaged product sales ...... $ 130 $ 100 $ 231 $ 185
Dispensing equipment
repair services ............. 15 12 27 25
Other transactions ........... 4 1 8 2
-------- -------- -------- --------
$ 149 $ 113 $ 266 $ 212
======== ======== ======== ========
Amounts affecting cost
of sales:
Purchases of syrup
and concentrate ............. $ (1,231) $ (1,126) $ (2,190) $ (2,049)
Purchases of sweetener ........ (84) (88) (156) (161)
Purchases of
finished products ........... (140) (127) (259) (226)
Marketing support
funding earned .............. 225 212 418 389
Cold drink equipment
placement funding earned .... 24 23 41 36
Cost recovery from sale of hot
fill production facility .... -- -- 8 --
.-------- -------- -------- --------
$ (1,206) $ (1,106) $ (2,138) $ (2,011)
======== ======== ======== ========
Amounts affecting selling,
delivery, and administrative
expenses:
Marketing programs .......... $ 1 $ -- $ 1 $ --
Operating expense
reimbursements:
Payable to TCCC ........... (4) (5) (8) (9)
Due from TCCC ............. 9 8 18 17
-------- -------- -------- --------
$ 6 $ 3 $ 11 $ 8
======== ======== ======== ========
-23-
Of the $200 million available to be earned by us in 2003 under the Sales Growth
Initiative (SGI) agreement, $30 million is being recognized during 2003 as sales
are achieved. The remaining $170 million "Volume Growth Funding" is earned by
attaining mutually established sales volume growth targets for brands owned by
The Coca-Cola Company. The annual and quarterly target minimums are
established for each program year through mutual agreement with TCCC based on
expected sales volume. Sales volume growth is determined through a formula with
adjustments for brand conversions, brand acquisitions, and new brand
introductions, and performance in excess of the previous year's performance. The
SGI agreement provides for penalties of $1 per equivalent case when targets are
not met. We currently expect to earn $130 million of the $170 million "Volume
Growth Funding" available to us under the SGI agreement.
In applying the terms of the SGI agreement to our volume performance for the
first six months of 2003, we recognized approximately $35 million and $77
million of the 2003 Volume Growth Funding in the second quarter and first
six months of 2003, respectively. Six month 2003 target minimums were not
achieved resulting in an accrual of $8 million for penalties to be offset
against future funding commitments.
We participate in cooperative trade marketing arrangements (CTM) for the U.S.
Coca-Cola system administered by TCCC. Beginning in 2002, we became responsible
for all costs of the program in our territories, except for a limited number
of specified customers. We transfer amounts to TCCC under the program for
payments to customers. Pursuant to these arrangements, amounts paid or payable
to TCCC for the six months ended June 27, 2003 totaled approximately $130
million.
The increases in marketing support funding earned for the second quarter and
first six month period of 2003 from the comparable periods in 2002 are primarily
due to the increase in marketing support funding earned in Europe in the second
quarter of 2003.
Support funding recognized under the Jumpstart programs with TCCC is shown as
cold drink equipment placement funding in the table above. In the second quarter
of 2003, we recognized approximately $24 million of Jumpstart funding as a
reduction of cost of sales compared to $23 million for the second quarter of
2002. We recognized $41 million for the six months ended June 27, 2003 compared
to $36 million for the same period in 2002. We expect Jumpstart funding to be
earned for full-year 2003 to approximate $75 million.
In connection with the second-quarter 2003 Chaudfontaine acquisition, we entered
into an agreement with TCCC to equally share the profits or losses from the sale
of Chaudfontaine products. We do not anticipate Chaudfontaine will have a
significant impact on our 2003 results.
CASH FLOW AND LIQUIDITY REVIEW
CAPITAL RESOURCES
Our sources of capital include, but are not limited to, cash flows from
operations, the issuance of public or private placement debt, bank borrowings,
and the issuance of equity securities. We believe that available short-term and
long-term capital resources are sufficient to fund our capital expenditure and
working capital requirements, scheduled debt payments, interest and income tax
obligations, dividends to our shareowners, acquisitions, and share repurchases.
At August 8, 2003, we had $7.2 billion in available capital under our public
debt facilities available for long-term financing, refinancing of debt
maturities, and refinancing of
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commercial paper. Of this amount, we had (i) $2.1 billion available under a
Euro Medium-Term Note Program, (ii) $1.4 billion ($2.0 billion Canadian) in
Canadian dollar debt securities under a Canadian Medium-Term Note Program, and
(iii) $3.7 billion available under registration statements with the Securities
and Exchange Commission. The registration statement we filed with the Securities
and Exchange Commission in October 2002 increased the amounts of registered
debt securities available for issuance by $3.5 billion when it became effective
in August 2003.
In addition, we satisfy seasonal working capital needs and other financing
requirements with short-term borrowings under our commercial paper programs,
bank borrowings, and various lines of credit in the countries in which we
operate. At June 27, 2003 we had approximately $1.8 billion outstanding in
commercial paper and approximately $3.2 billion available as a back-up to
commercial paper under working capital lines of credit. We intend to continue
refinancing borrowings under our commercial paper programs and our short-term
credit facilities with longer-term fixed and floating rate financings. At the
end of second-quarter 2003, our debt portfolio contained 65% fixed rate debt and
35% floating rate debt.
SUMMARY OF CASH ACTIVITIES
Cash and cash investments increased $67 million during the first six months of
2003 from net cash transactions. Our primary source of cash for the first six
months of 2003 was proceeds from the issuance of debt aggregating $424 million.
Our primary uses of cash were debt repayments totaling $570 million and capital
expenditures totaling $460 million.
Operating Activities: Operating activities resulted in $622 million of net cash
provided during the first six months of 2003 compared to $681 million for the
same period in 2002. The decrease in cash provided from operations was primarily
due to an increase in net working capital requirements for the first six months
of 2003.
Investing Activities: Net cash used in investing activities resulted primarily
from our continued capital investments. We expect full-year 2003 capital
expenditures to total approximately $1.1 billion.
Financing Activities: We continue to refinance portions of our short-term
borrowings as they mature with short-term and long-term fixed and floating rate
debt. Exchange rate changes during the second quarter of 2003 resulted in an
increase in long-term debt of $212 million.
FINANCIAL CONDITION
Net accounts receivable increased 21% from December 31, 2002 to $2,011 million
at June 27, 2003 primarily due to the seasonal working capital requirements and
second-quarter 2003 results including strong sales volume in Europe in June, and
exchange rate changes. The percentage increase in inventory from December 31,
2002 was 17%. This increase primarily results from the 4th of July holiday
requirements in North America, and suppressed volume growth in June 2003. The
increase in license intangible assets resulted from currency exchange rate
changes.
The current portion of long-term debt increased from December 31, 2002 primarily
due to a classification of a $500 million note that matures in April 2004 in
current maturities. Total debt outstanding at second-quarter 2003 increased from
translation differences by $212 million and decreased from net repayments by
$105 million from year-end 2002. Retirement and insurance programs and other
long-term obligations increased approximately $100 million from December
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31, 2002, due to normal increases in retirement obligations of approximately $50
million and increases in amounts payable under long-term customer contracts of
approximately $50 million.
In the first half of 2003, changes in currencies from currency translations and
hedges of net investments resulted in net gains in comprehensive income of
$219 million. As currency exchange rates change, translation of the income
statements for our businesses outside of the United States into U.S. dollars
affects the comparability of revenues and expenses between periods.
KNOWN TRENDS AND UNCERTAINTIES
CONTINGENCIES
Our business practices are being reviewed by the European Commission in various
jurisdictions for alleged abuses of an alleged dominant position under Article
82 of the EU Treaty. We do not believe we have a dominant position in the
relevant markets, or that our current or past commercial practices violate EU
law. Nonetheless, the Commission has considerable discretion in reaching
conclusions and levying fines, which are subject to judicial review. The
Commission has not notified us when it might reach any conclusions.
Our California subsidiary has been sued by several current and former employees
over alleged violations of state wage and hour rules. Our subsidiary continues
to investigate the claims and at this time it is not possible to predict the
outcome. Our subsidiary is defending against the claims vigorously.
In 2000, CCE and TCCC were found by a Texas jury to be jointly liable in a
combined amount of $15.2 million to five plaintiffs, each a distributor of
competing beverage products. These distributors sued alleging that CCE and TCCC
engaged in unfair marketing practices. The trial court's verdict was upheld by
the Texas Court of Appeals in July 2003; we and TCCC will apply to the Texas
Supreme Court for leave to appeal to that court. We believe our reserves are
adequate to cover the damages awarded by the trial court if its verdict is
allowed to stand. The claims of the three remaining plaintiffs in this case
remain to be tried and four additional competitors have filed similar claims
against us. We have not provided for any potential awards under these additional
claims. We intend to defend against these claims vigorously.
On June 20, 2003 Riverwood International Corporation filed a patent infringement
suit against MeadWestvaco Corporation in the United States District Court for
the Northern District of Georgia. We currently hold a multi-year supply
contract with MeadWestvaco for the supply of certain 12-can multipack
paperboard cartons known as the "fridge pack." Riverwood's suit seeks a
preliminary injunction enjoining MeadWestvaco from supplying us with fridge
pack packaging. MeadWestvaco has denied the material allegations of
Riverwood's complaint and has opposed the preliminary injunction. We have
intervened in the action to oppose the preliminary injunction, and a hearing
on the injunction is scheduled on September 4, 2003. We are unable to predict
the court's disposition of the motion for a preliminary injunction, but we
have taken measures to assure that we will have sufficient packaging
available for our cans in the unlikely event a preliminary injunction is
granted.
In addition of these cases outlined above, we are a defendant in various other
matters of litigation generally arising out of the normal course of business.
Although it is difficult to predict the ultimate outcome of litigation
matters,
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management believes, based on discussions with counsel, that any ultimate
liability would not materially affect our financial position or liquidity.
We recognize funding previously received under the Jumpstart programs with TCCC
as cold drink equipment is placed and over the period we have the potential
requirement to move equipment. Under the programs, we agree to certain
performance and reporting provisions. Should provisions of the program not be
satisfied, and alternative solutions not be agreed upon, the contract allows
TCCC to pursue a partial refund of amounts previously paid. No refunds have ever
been paid under this program, and we believe the probability of a partial refund
of amounts previously paid under the program is remote. We believe we would in
all cases resolve any matters that might arise with TCCC.
Under the Sales Growth Initiative (SGI) agreement with TCCC, we are to receive
$170 million of "Volume Growth Funding" in 2003 which is to be earned by
attaining mutually established volume growth targets for brands owned and
distributed by The Coca-Cola Company. The annual and quarterly target
minimums are established for each program year through mutual agreement with
TCCC based on expected sales volume. The SGI agreement provides for
penalties of $1 per equivalent case if these minimum targets are not met.
Under the SGI agreement, quarterly funding commitments are advanced at
the beginning of each quarter less penalties from any year-to-date
shortfall to targets.
Our tax filings are routinely subjected to audit by tax authorities in most
jurisdictions where we conduct business. These audits may result in assessments
of additional taxes that are subsequently resolved with the authorities or
potentially through the courts. Currently, there are assessments or audits which
may lead to assessments involving certain of our subsidiaries, including
subsidiaries in Canada and France, that may not be resolved in the foreseeable
future. We believe we have substantial defenses to the questions being raised
and intend to pursue all legal remedies available if we are unable to reach a
resolution with the authorities. We believe we have adequately provided for any
ultimate amounts that would result from these proceedings, however, it is too
early to predict a final outcome in these matters.
We have filed suit against two of our insurers to recover losses incurred in
connection with the 1999 European product recall. We are unable to predict the
final outcome of this action at this time.
ACCOUNTING DEVELOPMENTS
In January 2003, the EITF issued No. 02-16 (EITF 02-16), "Accounting by a
Customer (Including a Reseller) for Cash Consideration Received from a Vendor."
EITF 02-16 addresses accounting and reporting issues related to how a reseller
should account for cash consideration received from vendors.
Under EITF 02-16, our income statements classify funding received from TCCC and
other licensors in cost of sales. These amounts were previously included in net
operating revenues or as a reduction of selling, delivery, and administrative
expenses. Additionally, amounts we receive from TCCC for dispensing equipment
repair services are included as revenue. We are applying EITF 02-16 to all
existing programs and all amounts within reported periods are classified
consistently between periods.
In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51." FIN 46 requires
variable interest entities to
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be consolidated by the primary beneficiary of the entity in certain instances.
FIN 46 is effective for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied by us in third
quarter 2003. We are currently evaluating the implications of the adoption of
FIN 46 on our financial position, cash flows, and results of operations.
In December 2002, the FASB issued Statement No. 148 (FAS 148), "Accounting for
Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB
Statement No. 123". FAS 148 amends, among other things, the disclosure
provisions of FAS 123 and APB 28, "Interim Financial Reporting." The additional
disclosures required under FAS 148 have been included in the footnotes to the
financial statements.
The FASB is currently evaluating a project on pension plan accounting and
disclosures. Certain disclosure considerations being evaluated are presented
below. As provided by FAS 87, we revalue pension liabilities annually. Pension
expense for the current year is based on the year-end valuation of liabilities
and the expected average value of pension assets utilizing a 5-year asset
smoothing technique.
The following table outlines significant assumptions used in the calculation of
pension liabilities and pension expense:
2003 2002
------ ------
Balance Sheet Assumptions
Discount Rate .................................... 6.8% 6.9%
Salary Increase .................................. 4.7% 4.8%
Income Statement Assumption
Expected Return on Assets ........................ 8.4% 9.2%
The following table presents pension expense as it is included in the income
statement (in millions):
QUARTER ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
2003 2002 2003 2002
-------- -------- -------- --------
Cost of Sales .................. $ 3 $ 2 $ 5 $ 4
Selling, Delivery, and
Administrative Expenses ...... 21 10 40 21
------ ------ ------ ------
Total Pension Expense .......... $ 24 $ 12 $ 45 $ 25
====== ====== ====== ======
Components of Net Periodic
Pension Cost:
Service Cost ................... $ 21 $ 18 $ 41 $ 36
Interest Cost .................. 29 25 58 50
Expected Return on Plan Assets . (29) (31) (59) (62)
Amortization ................... 3 -- 5 1
------ ------ ------ ------
Total Pension Expense .......... $ 24 $ 12 $ 45 $ 25
====== ====== ====== ======
Pension contributions were $12 million and $10 million for the six months ended
June 27, 2003 and June 28, 2002, respectively. Contributions for full-year 2002
were $76 million and are expected to be approximately $160 million for full-year
2003. Our policy is to fund the U.S.
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pension plans at a level to maintain, within established guidelines, the IRS
defined 90% Current Liability Funded status.
COMPETITION
The non-alcoholic beverage category of the commercial beverages industry in
which we compete is highly competitive. We face competitors that differ not only
between our North American and European territories, but also within individual
markets in these territories. Moreover, competition exists not only in this
category but also between the non-alcoholic and alcoholic categories.
Marketing, breadth of product offering, new product and package innovations, and
pricing are significant factors affecting our competitive position, but the
consumer and customer goodwill associated with our products' trademarks is our
most favorable factor. Other competitive factors include distribution and sales
methods, merchandising productivity, customer service, trade and community
relationships, the management of sales and promotional activities, and access to
manufacturing and distribution. Management of cold drink equipment, including
vending and cooler merchandising equipment, is also a competitive factor. We
face strong competition by companies that produce and sell competing products to
a concentrated retail sector where buyers are able to choose freely between our
products and those of our competitors.
In 2002, our sales represented approximately 13% of total nonalcoholic beverage
sales in our North American territories and approximately 8% of total
nonalcoholic sales in our European territories. Sales of our products compared
to combined alcoholic and nonalcoholic beverage products in our territories
would be significantly less.
Our competitors include the local bottlers of competing products and certain of
our customers that have private label products. For example, we compete with
bottlers of products of PepsiCo, Inc., Cadbury Schweppes plc, Nestle S.A.,
Groupe Danone, Kraft Foods Inc., and private label products including those of
certain of our customers. In certain of our territories, we sell products we
compete against in other territories; however, in all our territories our
primary business is the manufacture, distribution, and sale of products of The
Coca-Cola Company. Our primary competitor in each territory may vary, but within
North America, our predominant competitors are The Pepsi Bottling Group, Inc.
and Pepsi Americas, Inc.
CAUTIONARY STATEMENTS
Certain expectations and projections regarding future performance we referenced
in this report are forward-looking statements. These expectations and
projections are based on currently available competitive, financial, and
economic data, along with our operating plans and are subject to future events
and uncertainties. Among the events and uncertainties which could adversely
affect future periods are:
- An inability to achieve price increases,
- an inability to achieve cost savings,
- marketing and promotional programs that result in lower than expected
volume,
- efforts to manage price that adversely affect volume,
- an inability to meet performance requirements for funding from TCCC,
- the cancellation or amendment of existing funding programs with TCCC,
- material changes from expectations in the costs of raw materials and
ingredients,
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- an inability to achieve the expected timing for returns on cold drink
equipment expenditures,
- an inability to place cold drink equipment at required levels under our
Jumpstart programs with TCCC,
- an inability to meet volume growth requirements on an annual basis under
the SGI program with TCCC,
- an unfavorable outcome from the European Union investigation, the
California wage and hour case, the Texas unfair marketing practices case,
or the Riverwood/Mead patent infringement case,
- material changes in assumptions used in completing impairment analyses of
intangible assets,
- an inability to meet projections for performance in recently acquired
territories,
- potential assessment of additional taxes resulting from audits conducted
by tax authorities,
- unfavorable interest rate and currency fluctuations,
- competitive pressures that may cause channel and product mix to shift from
more profitable cold drink channels and packages,
- weather conditions in markets we serve,
- potential for market recalls of products,
- unfavorable market performance on our pension plan assets,
- and changes in debt rating.
In addition to the above cautionary statements, all forward-looking statements
contained herein should be read in conjunction with the cautionary statements
found on page 73 of our Annual Report for the fiscal year ended December 31,
2002.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have no material changes to the disclosure on this matter made in
"Management's Financial Review - Interest Rate and Currency Risk Management" on
Page 67 of our Annual Report to Shareowners for the year ended December 31,
2002.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the filing of this report, an evaluation was performed
of the effectiveness of the design and operation of our disclosure controls and
procedures. This evaluation was conducted under the supervision and with the
participation of our management, including our Chief Executive Officer and our
Chief Financial Officer. Based on that evaluation, our Chief Executive Officer
and our Chief Financial Officer concluded that our disclosure controls and
procedures were effective in alerting them timely to material information
required to be included in our Exchange Act reports. There have been no
significant changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to the date we carried out our
evaluation.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 2003 our subsidiary, BCI Coca-Cola Bottling Company of Los Angeles, paid
$182,377 to settle its liability as a potentially responsible party for the
Gibson Environmental Superfund Site in Bakersfield, California.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit (numbered in accordance with Item 601 of Regulation S-K):
INCORPORATED BY
EXHIBIT REFERENCE
NUMBER DESCRIPTION OR FILED HEREWITH
- ------- -------------------------------------------------- -----------------
3(II) Bylaws of Coca-Cola Enterprises Inc. as amended Filed herewith.
through July 15, 2003.
10.1 Employment Agreement between Coca-Cola Enterprises Filed herewith.
Inc. and Dominique Reiniche, dated as of April 23,
2003.
10.2 Consulting Agreement between Coca-Cola Enterprises Filed herewith.
Inc. and Norman P. Findley, III, dated as of May
15, 2003.
12 Earnings to Combined Fixed Charges and Preferred Filed herewith.
Stock Dividends.
31.1 Certificate of Lowry F. Kline, filed pursuant to Filed herewith.
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certificate of Patrick J. Mannelly, filed pursuant Filed herewith.
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certificate of Lowry F. Kline, furnished pursuant Furnished herewith.
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certificate of Patrick J. Mannelly, furnished Furnished herewith.
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
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(b) Reports on Form 8-K:
During second-quarter 2003, we filed the following current reports on
Form 8-K:
DATE OF REPORT DESCRIPTION
- -------------------- --------------------------------------------------------
April 2, 2003 Press release announcing first-quarter 2003 volume
growth and full-year 2003 financial outlook (Items 7 and
9). Filed April 2, 2003.
April 17, 2003 Press release announcing webcast of first-quarter 2003
earning conference call (Items 7 and 9). Filed April 22,
2003.
April 23, 2003 Press release announcing first-quarter 2003 results
(Items 7 and 9). Filed April 24, 2003.
May 14, 2003 Press release announcing webcast to analysts and
investors on May 19, 2003 (Items 7 and 9). Filed May 14,
2003.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COCA-COLA ENTERPRISES INC.
(Registrant)
Date: August 11, 2003 /s/ Patrick J. Mannelly
-------------------------------------------------
Patrick J. Mannelly
Senior Vice President and Chief Financial Officer
Date: August 11, 2003 /s/ Rick L. Engum
-------------------------------------------------
Rick L. Engum
Vice President, Controller and
Principal Accounting Officer
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