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COCA COLA CO Annual Report, Year Ended Dec 31, 1993

Filing Date
Filed March 14, 1994
Period End
December 31, 1993
Security
KO
In the record · 2016–202610-K1110-Q338-K143

KO filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 143 current reports (8-K) between 2016 and 2026.

  1. FY2018 annual report10-K · Feb ’19Feb ’19
  2. Leadership change8-K · Dec ’21Dec ’21
  3. Leadership change8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed March 14, 1994. Cited figures are marked; the original filing is the authoritative source.

The Coca-Cola Company's 1993 10-K shows a company whose soft drink concentrate business dominates both revenue and profit.

Soft drinks produced 87% of 1993 net operating revenues ($13.96 billiona consolidated, up 7% from $13.07 billion) and 96% of operating income. Operating income rose 12% to $3.10 billion, with operating margin expanding to 22% from 21% as gross margin improved to 63% from 61%. Net income reached $2.18 billion, or $1.67 per share, up from $1.26 in 1992 (which absorbed a $219 million accounting charge), while income before accounting changes grew 17% to $1.68 per share.

The Company generated $2.51 billionb in operating cash flow and $1.62 billion of free cash flow after reinvestment, and repurchased roughly $586 million of stock during the year. The balance sheet and capital allocation picture is conservative. Total debt fell to $3.10 billion from $3.21 billion, the total-debt-to-total-capital ratio improved to 40.3% from 45.2%, and the Company holds AA (S&P) and Aa3 (Moody's) credit ratings.

Management is targeting a dividend payout near 40% of net income and raised the 1994 quarterly dividend to $0.195c, an annualized $0.78, the 32nd consecutive annual increase. Management cites an after-tax cost of capital of roughly 11% and reports Economic Profit of $1.5 billion, up from $1.3 billion. The main risks flagged are international exposure (about 79% of operating income came from outside the United States, which carries currency and political risk), upward pressure on the effective tax rate from 1993 U.S. tax law changes affecting Puerto Rico operations, and litigation.

The most significant legal matter is a Seven-Up Company suit seeking at least $500 milliond in punitive damages, with trial set for mid-1994. A Tri-Star-related shareholder suit was also remanded for trial. Management believes both cases are defensible and that other proceedings will not be materially adverse.

02—Key points

Key Highlights

  1. Net operating revenues rose 7% to $13.96 billion in 1993 and gross margin expanded to 63% from 61%, driven by lower aspartame and orange solids costs.
  2. Operating income grew 12% to $3.10 billion, with soft drinks generating 96% of operating income; international operations contributed about 79%.
  3. Net income was $2.18 billion ($1.67 per share), up from $1.26 in 1992, which included a $219 million accounting-change charge; income before accounting changes rose 17% to $1.68 per share.
  4. Free cash flow after reinvestment reached $1.62 billion, up from $873 million, and total debt-to-capital improved to 40.3% from 45.2%.
  5. The Company repurchased about $586 million of stock in 1993 under a plan authorizing up to 100 million shares through 2000, and raised the 1994 annual dividend to $0.78 per share.
  6. Equity investments in bottlers (Coca-Cola Enterprises at about 43.5%, Coca-Cola Amatil at 51%, Coca-Cola FEMSA at 30%) are strategic, but some are being reduced toward below-50% stakes, and equity income was $91 million.
  7. Material legal risk centers on the Seven-Up Company suit seeking at least $500 million in punitive damages, with trial scheduled for mid-1994; management considers the defenses meritorious.

03—Questions

Frequently Asked Questions

  1. How profitable and fast-growing is the core soft drink business?

    Very. Soft drinks produced 87% of 1993 revenues and 96% of operating income. Operating margin reached 22% (up from 21%), and the Company reports a 5% worldwide unit case volume increase in 1993, with new markets such as China, East Central Europe, and Indonesia adding growth.

  2. Is the dividend safe and how is cash being used?

    The dividend looks well covered. The 1993 payout ratio was 41%, against a stated target of about 40% of net income, and the 1994 dividend was raised to $0.78 per share, the 32nd straight annual increase. Free cash flow of $1.62 billion funded dividends of $883 million, share repurchases of about $586 million, and debt reduction.

  3. What are the main risks for investors?

    Foreign exposure is the largest factor: about 79% of operating income comes from outside the United States, exposing results to currency swings and emerging-market instability. U.S. tax law changes will limit the benefit of Puerto Rico manufacturing, which should push the effective tax rate up from 31.3%. Litigation includes the Seven-Up suit seeking at least $500 million in punitive damages and a Tri-Star shareholder case returned for trial.

  4. How strong is the balance sheet?

    Strong. The Company holds AA (S&P) and Aa3 (Moody's) ratings, interest coverage is 18x, and net debt fell to $1.6 billion. Total debt fell to $3.10 billion, and the Company has $1.4 billion in credit lines, with $150 million drawn. Current liabilities exceeded current assets at year-end, which management attributes to deliberate short-term debt management and share buybacks.

04—Continue

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