This year, even as we sell 1 billion

servings of our products daily, the world

will still consume 47 billion
servings of other beverages every day.
We’re just getting started.
1997 Annual Report

Financial Highlights
Percent
Year Ended December 31, 1997 1996 Change
(In millions except per share data and ratios, as reported)

Total return (share price appreciation plus dividends) 27.8% 43.1%

Closing market price per share $ 66.69 $ 52.63 27 %
Total market value of common stock $ 164,766 $ 130,575 26 %
Net operating revenues $ 18,868 $ 18,673 1%
Operating income $ 5,001 $ 3,915 28 %
Net income $ 4,129 $ 3,492 18 %
Basic net income per share $ 1.67 $ 1.40 19 %
Diluted net income per share $ 1.64 $ 1.38 19 %
Cash dividends per share $ 0.56 $ 0.50 12 %
Average shares outstanding 2,477 2,494 (1)%
Average shares outstanding assuming dilution 2,515 2,523 0%
Share owners’ equity at year end $ 7,311 $ 6,156 19 %
Return on capital 39.4% 36.7%

Contents
33 Financial Review
3 A Business in Its Infancy 42 Selected Financial Data
A Message from M. Douglas Ivester
44 Consolidated Financial Statements
9 Why Is a Billion Just the Beginning?
49 Notes to Consolidated Financial Statements
A Look at the Other 47 Billion
64 Management and Board of Directors
20 The Next Billion
Our Opportunity. Our Ability. Our Mindset. 66 Share-Owner Information
23 Operating Group Reviews 67 Glossary
Dear Fellow Share Owners,
The pioneers who built this Company scarcely could and to you, its owners. But their legacy is more
have imagined it. About the time you are reading than might appear from a first glance at their
this letter, your Company will achieve an amazing achievements. They also left us — to their great
milestone — sales of Coca–Cola and other Company credit — an unfinished business, a business in its
products will exceed 1 billion servings per day. infancy, a business with a future.
It took 22 years for us to sell the first billion First came the creator of Coca–Cola, John
servings of Coca–Cola. And now, we’re selling a Pemberton, nearly 112 years ago. Later came Asa
billion drinks a day. Candler, the originator of 20th century Coca–Cola
As we mark that milestone, and as we look back marketing; Robert Woodruff, for 60 years the archi–
at another year of record sales, record profits and tect of our Company’s success and father of our
healthy return on your investment, two key thoughts international expansion; and many thousands more
stand out: the many pioneers who brought us to Coca–Cola men and women, less famous but no less
this point, and the steps we’re taking to go after the crucial in their pioneering efforts.
next billion. Among those pioneers, none stood taller in creat–
Those who came before us blazed a trail with ing value for our share owners than Roberto C.
their vision, their imagination, their creativity and Goizueta, who led your Company for 16 years as
their dedication — dedication to this business, chairman of our Board of Directors and chief

3
 A MESSAGE FROM M. DOUGLAS IVESTER

executive officer. He regarded our mission, creating very exciting is this: Never before has this Company
value for you over time, as paramount. been more perfectly poised for pioneering, with a
But his legacy, too, is something more. He has global system far more capable and far stronger
left us a business he knew was still very much in than just a few short years ago. This is a business in
its infancy. And he has left behind nearly 30,000 tal– its infancy, a true growth company with true, incom–
ented women and men capable of doing their jobs parable growth opportunities all over this world.
extremely well and building on his pioneering Just name another business with a more popular,
efforts — just as he built so superbly on the work of affordable product, with a stronger foothold in more
the pioneers who preceded him. countries, yet with the opportunity to serve almost
all of the world’s nearly 6 billion consumers morn–

Total Return: KO vs. Dow Jones ing, noon and night.

Industrial Average and S&P 500 I certainly cannot.
Dow Jones
Industrial Average
S&P 500 KO And the actions and results of this Company in
1997 make the case for our future more strongly
$1,643 than anything I could write.
Of greatest importance is the 28 percent total
return our Company produced on your investment —
appreciation in stock price plus dividends. We’re not
content with that, but it’s not bad atop 43 percent in
1996 and 46 percent in 1995. Still, we don’t look at

$542 this business solely in three–month or 12–month

$515
blocks. We continue to manage your business for the
long haul, and I think most of our investors probably
$100 $100 $100
look at their investments the same way.

1987 1997 1987 1997 1987 1997 But looking long term brings out some fascinat–
ing details that demonstrate the strength we enjoy.
Appreciation plus reinvested dividends on a $100 investment
from December 31, 1987 to December 31, 1997. During this Overall, we logged worldwide volume of 14.9 billion
period, an investment in Company stock climbed to more than unit cases of our products last year, up 9 percent
three times the value of a similar investment in the Dow Jones
Industrial Average or S&P 500. from 1996. That’s the same amount we sold
between 1886 and 1960. Those figures aren’t just
interesting; they’re instructive. If anyone questions
Those of us who are privileged to work for The the ability of a 112–year–old Company to grow,
Coca–Cola Company can best honor Roberto and point them to this one — because this Company isn’t
our other pioneers by doing as they did: building just growing; it’s growing by more cases than ever.
this business, finding more ways to bring Coca–Cola 1997 was a good year by other measures, as
and our other products to more people, recognizing well. Operating income topped $5 billion, an
our vast potential, and going after that next billion. all–time high. Net income was $4.1 billion, again an
And what makes the opportunity before us so all–time record and up 18 percent over 1996.

4
 A MESSAGE FROM M. DOUGLAS IVESTER

Earnings per share, at $1.67, grew 19 percent, continue investing in our business, with a disci–
following increases of 19 percent in each of the last plined focus on the long term. (When the Mexican
two years. peso fell by more than 50 percent between 1994
That EPS number included 23 cents per share in and 1995, our system continued to invest in our
gains from the sale of our stakes in certain bottling second–largest market. Today we’re seeing the
businesses. Our strategy of several years now — benefits, with a gain of 10 share points since then,
buying underperforming bottlers, investing in them, and volume up 11 percent in 1997.) We always
improving their performance and selling them to remember that exchange rates are not an indicator
powerful anchor bottlers to further drive sales — of our performance; volume growth is.
worked at a quicker pace than ever. And while gains Looking ahead over the long term, we see no
of this magnitude will not be repeated
every year, the result was good news, as
our Company made money and, more
“This is a business in its infancy, a true growth
importantly, the moves made our system
company with true, incomparable growth oppor-
significantly stronger.
tunities all over this world.”
But on Wall Street, where consistency
and predictability are highly prized, the
sizable impact of these transactions
wasn’t perceived as particularly good news. reason to change our ambitious and long–held
Significant gains in one year make the next years’ targets; we still expect worldwide volume growth of
earnings less consistently predictable. So, while 7–8 percent per year, on average, with earnings–
gains on bottling transactions have been part of per–share growth averaging in the upper teens
our financial picture for years — and will continue (15–20 percent). We may not hit those averages in
to be — going forward we will clearly enumerate every quarter, or in each individual year; for exam–
such transactions, differentiating those sizable ple, our transaction gains in 1997 would make it
gains, so there is a clear understanding about the tough for us to predict “lapping” our performance
ongoing strength of this business. in 1998. (This is nothing new; as far back as 1986,
1998, to no one’s surprise, may well present a we received a large gain upon selling numerous bot–
significant challenge as we report our results: the tling operations in the formation of Coca–Cola
impact of the U.S. dollar, which has strengthened Enterprises Inc.) Our track record for the last five
considerably over the past several years. Stronger years (18 percent average compounded EPS growth
dollars, of course, mean weaker currencies else– from continuing operations), 10 years (19 percent)
where, and our Company does business in dozens and 15 years (17 percent) is indicative of our
of currencies. expectations for the future.
But over time, we manage our currency But enough about the vagaries of financial report–
exposures to mitigate any negative impact from ing; let’s talk about the basics. The indicators of
currency fluctuations. And with the recent turmoil our core soft–drink business — such as volume and
in some economies, we see opportunities to operating income — remain extremely strong

5
A MESSAGE FROM M. DOUGLAS IVESTER

heading into 1998 and beyond. That points to our a decade–long deficit. In Australia, where Coca–Cola
growth potential; in country after country and town has long been the nation’s favorite soft drink,
after town, with consumer after consumer, all over POWERa – DE is now the favorite sports drink.

this world, this business is only now starting to Here at home, our U.S. volume increased by
take off. 6 percent, nearly double the growth of the U.S.
In China, the world’s largest market, our volume soft–drink industry. A few years ago, Coca–Cola USA
soared another 30 percent in 1997. But the average set the ambitious goal of 400 servings per capita
resident of China still drinks just six of our products per year by the 21st century; we’re now at 376 and
a year — certainly a business in its infancy. fast closing in on the target.
In Russia, where we took the lead over our Still, we know two important facts. One, perfor–
largest competitor in 1996, we widened that lead mance like that doesn’t just happen; it is the result of
to 3–to–1 in 1997; we opened four more plants not just being in the right places, but doing the right
things at the right time. And two — as you noticed
from the cover of this report — when our Company
Year-End Market Value of Our records its first billion–serving day, the world will also
Common Stock (in Billions)
drink about 47 billion servings of other beverages —
which means we have plenty of opportunity

$165
still ahead. (We’re already counting; 10 years from
now, just with population growth, the world will be
drinking 54 billion beverage servings a day.)
That’s why, as exciting as our achievements were
in 1997, we’re more excited about the capabilities
we’re putting in place for 1998 and beyond. More
than ever, our worldwide bottling network is becom–

$55
ing more cohesive around larger, stronger bottling
partners, strategically aligned with our goals for
building brands and volume, and well equipped to
$14
$7 build the infrastructure to reach more consumers in
more places more profitably.

1982 1987 1992 1997 Examples of our strengthened system abounded

in 1997. We completed the sale of our large minor–
ity stakes in our bottling partners in Great Britain,
Canada and New York to Coca–Cola Enterprises,
there on October 1, bringing our system’s Russian our largest anchor bottler (in which we remain
investment to $650 million and pointing to strong a major share owner). Panamerican Beverages
future growth. Inc., Latin America’s largest anchor, acquired our
The highlights go on and on. Last summer, we Venezuelan bottling venture and, separately,
became Puerto Rico’s soft–drink leader, reversing the Nicaraguan Coca–Cola bottler. We sold our

6
 A MESSAGE FROM M. DOUGLAS IVESTER

remaining minority stake in our Buenos Aires bot– review all of those moves would literally fill the rest
tler to another anchor, Coca–Cola FEMSA, S.A. de of this report, but even so, a few highlights deserve
C.V. Anchor bottler Coca–Cola Erfrischungsgetränke mention here.
AG merged with Coca–Cola Rhein–Ruhr to serve We continued our strong worldwide push behind
more of Germany. Sydney–based anchor Coca–Cola the popular contour bottle for Coca–Cola and
Amatil Limited acquired Coca–Cola
Bottlers Philippines Inc. (our
Philippine joint venture, which
“In country after country, all over this world,
began the trend toward strengthen–
this business is only now starting to take off.”
ing our bottlers back in 1981).
We formed a new anchor bottler,
Coca–Cola Nordic Beverages A/S, in
a joint venture with Carlsberg A/S, to serve Denmark the dimpled bottle for Sprite, two packages with
and Sweden. The Minute Maid Company imple– consumer recognition of which most companies
mented fundamental changes in its business could only dream. Brand Coca–Cola grew a strong
system, joining strong new partners, improving its 8 percent worldwide in 1997, while Sprite grew at a
product line and adding value to our Company. 13 percent clip.
Then, just this month, Coca–Cola Amatil In the United States, we reached an agreement to
announced plans to spin off a separate public make Coca–Cola classic the official soft drink of
company, Coca–Cola Beverages, serving existing NASCAR racing, connecting with millions of the
Coca–Cola Amatil territories in Europe. That move sporting world’s most loyal fans.
will allow Coca–Cola Amatil to focus on further Meanwhile, POWERa – DE became the official sports

development of the Asia–Pacific region. drink of the fast–growing National Hockey League.
Coca–Cola Beverages will be led by Neville Isdell, And Surge continued its very strong performance,
former president of our Greater Europe Group; he is our biggest new product launch in more than a
succeeded by Bill Casey, former CEO of our bottler decade. This “fully loaded citrus soda” is a hit with
in Canada, while David Kennedy, former general young people, and will soon reach 90 percent of the
manager of Coca–Cola Fountain, will join Coca–Cola United States. Already, it’s among the top 10 soft
Amatil as managing director. drinks at petroleum accounts.
The moves by those three talented veterans Barq’s, which became America’s top root beer in
speak volumes about the management depth of 1997, arrived in Indonesia. (This year, this beloved
the Coca–Cola system. And the effect of all these brand will celebrate its 100th birthday.) We
changes — and many more — is an augmented relaunched Fanta in Great Britain, and promoted
network of powerful Coca–Cola bottling partners, Sprite and the National Basketball Association
able to more swiftly and efficiently serve more in Australia, Turkey and Northern Africa. In
areas with more of our products. December, we signed a deal to acquire Orangina,
At the same time, we have continued working very France’s popular — and, we think, promising —
aggressively to market and build our brands. To orange soft drink.

7
A MESSAGE FROM M. DOUGLAS IVESTER

1998 should prove equally eventful. As this report That’s not to say nothing will change in 1998; there
goes to press, the Olympic Winter Games are has never been a year without change in this
concluding, extending our sponsorship of the Company’s history. We owe it to our predecessors,
Olympics to 70 years. And we’re looking forward to and to you, to maintain their pioneer spirit, and I
a great year of promotions with World Cup soccer, intend to see that we do just that. I’ve developed a
the sports world’s other favorite mega–event; we’ve reputation around here for always asking questions,
extended our partnership with the World Cup and and I’ll keep asking them, always looking to make us
FIFA, soccer’s governing body, through 2006. better. I am obsessed with all the places Coca–Cola is
We intend to keep on working to make our brands not, as are our people, and it’s my job to elevate their
always special, different and better in the minds aspirations as they go out and find them all.
and hearts of our consumers and customers. We No new CEO ever started out with a better team.
will serve more customers with more promotions From our senior management to all our colleagues
and more strategies to drive their businesses and around the world, our people are talented and hard
ours, and we will take more steps to strengthen and working, with a real commitment to building this
align the bottling system that serves them. Clearly, business and building value for you. And we know
the worldwide Coca–Cola system is at the dawn of a we could not realize the opportunities before us
new day of expertise and capabilities. without the support of our bottling partners and
As for me, I am deeply honored by the opportunity the millions of customers who sell our brands.
to lead what I believe is the most noble business We’re grateful to them for putting our products in
on earth. Mr. Woodruff always said that everyone who the world’s hands, every day.
touches Coca–Cola should benefit — and our strength– Finally, we appreciate the confidence you have
ening system is making that maxim truer than ever. shown in our Company, entrusting us with your
Your Company and its bottling partners have investment. We are the recipients of a great legacy:
enriched the lives of millions of people all over the a Company with a legendary history, yet with a
world — share owners, customers, communities — barely tapped world of opportunity. With vast hori–
by offering a simple moment of refreshment and zons ahead, we look forward to blazing new trails
good times we know as Coca–Cola. That is some– of success, as did the pioneers who preceded us.
thing special indeed, and I’m already enjoying
the challenge of leading such an enterprise. I appre–
ciate the confidence of our Board of Directors, and
am thankful for their wise guidance.
Last fall, a reporter asked me whether the Company
would change directions. My answer was simple: “No
left turns, no right turns.” This Company is on a sure M. Douglas Ivester
and steady course. We will continue our strategic Chairman, Board of Directors,
effort to produce profitable volume growth for our and Chief Executive Officer
exceptional stable of brands. February 19, 1998

8
WHY is a billion a day just the beginning?
BECAUSE they’re still called “coffee breaks.”
Stepping down the hall for a coffee break has
become an office tradition around the world.
But we’re intently focused on making sure that
any time people need to be refreshed, they
take a “Coca-Cola break.”
BECAUSE some fountain drinks are still easier to find.
In many places, it’s easier to find a water
fountain than a Coca-Cola. That’s why we
continue to strengthen our distribution
system. We’re working hard to make our
products an integral part of any landscape
so they are always within easy reach.
BECAUSE some people still try to sell you substitutes.
Even in our most developed markets, there are places where
people get stuck with a stand-in for The Real Thing. We’re
constantly taking steps to win consumers and customers by
offering better value and superior refreshment.
BECAUSE few place settings are this complete.
Wine is so closely associated with meals that it’s
a part of every formal place setting and every
crystal pattern. Yet, even with all of its success,
the world’s favorite soft drink still doesn’t have a
reserved place at the table. We’re out to change
that by making Coca-Cola the preferred drink for
any occasion, whether it’s a simple family supper
or a formal state dinner.
BECAUSE people still say, “for all the tea in China.”
It’s a common phrase for good reason. There is a lot of tea in
China, and everywhere else in the world. But increasingly,
people in China are enjoying Coca-Cola, too. In 1997, we were
named the most recognized international trademark and most
preferred soft drink in that country of 1.2 billion people.
 Opportunity … Ability … Mindset

OPPORTUNITY ABILITY

Just about any company would be thrilled, and many We’re constantly enhancing our capabilities and capac–
content, to serve a billion of its products a day, with its ities to capture opportunities at every level of our
flagship brand a household name around the world. We business. That’s especially true when it comes to two of
are thrilled … but still discontented. our primary sources of competitive advantage — the
When we look at our business, we’re not nearly as strength of our brands and the power of our
intrigued by the billion we just served distribution system.
as we are by those 47 billion servings
of other beverages people drink every Connecting with consumers — We sell
day. We’d rather look forward than a simple product that helps satisfy a
back, and we see enough opportunity daily need of everyone on the planet —
to keep us busy for a very long time. refreshment. Our products don’t just
Worldwide, the average person quench thirst; they provide a moment
drinks our beverages about once of physical and emotional replenish–
a week. And 4 billion consumers ment that can happen anytime and
live in countries where the average anywhere. More and more, we’re
is even less. The reality is that coun– learning how to make those simple
tries with about 20 percent of moments of refreshment special for
the world’s population account for our consumers through our brands
80 percent of our volume. and promotions.
Those statistics point to vast opportunity. But it takes For instance, we’re creating unique events and activi–
more than just potential to deliver unit case volume ties that allow consumers to connect with the authentic,
growth and sustained earnings. On these and the follow– refreshing spirit of Coca–Cola. One such experience is
ing pages, you’ll learn how we’re bolstering our ability — “Coca–Cola Sky Field” in Atlanta, an interactive attrac–
our capabilities and capacities — to capture those tion where fans can enjoy two great pastimes — watch–
opportunities, and how we’re using our financial strate– ing baseball and drinking Coca–Cola.
gies and structures to help us build those capabilities. Another is the “Refreshing Oasis” program in Peru.
You’ll also read about our mindset — our single–minded There, we’re connecting the refreshing qualities of
focus on value creation — and how that drives everything Coca–Cola with the joys of a beach experience by dis–
we do. Opportunity, ability, mindset … the keys to our patching “Refreshing Squads” to distribute our ice–cold
next billion. products and trademarked merchandise.

20
 S A L E S , M A R K E T I N G A N D O P E R AT I O N S

The popularity of these and similar experiences watermelon and pineapple, in the United States, and
reflects the widespread appeal of our trademarks and “Electric Chill,” a blend of blackberry, raspberry and
products. With four of the top five soft–drink brands in apple flavors, in Australia. Also in 1997, we relaunched
the world, we already have a powerful brand portfolio. one of our biggest sellers in India, Thums Up, with
And those brands are growing every day. new packaging and advertising to reinforce the brand’s
connection with sports.

1997 Growth Rates for Our Core Brands —

Coca-Cola Up 8%
diet Coke/Coca-Cola light Up 5%
Sprite Up 13%
Fanta Up 6%

To build on that momentum, we continue to clearly

differentiate each brand in the eyes of our consumers.
Here are just a few of the actions we took in 1997 to
enhance our brands:
• We gave Coca–Cola a global facelift, creating new
graphics for our packaging, point–of–sale materials,
street signs, trucks and vending machines. In the
United States, we also introduced six–pack 500–ml bot–
tles for Coca–Cola classic in proprietary basket carriers. In response to our consumers’ changing tastes and
• For diet Coke — or Coca–Cola light, as it is called needs, we also introduced a number of new brands in
in some countries — we developed new graphics, 1997. Among them: Smart, the first soft drink ever
and advertising that touts the brand’s confident, developed specifically for the Chinese market; Kuat,
spirited attitude. a guarana berry drink for Brazilian consumers; Ciel,
• To clearly communicate the energetic, irreverent created to take advantage of the growing bottled–water
personality of Sprite, we created edgy promotional business in Mexico; and Citra, our popular new U.S.
tie–ins around the world with the National Basketball citrus soft drink for active young people.
Association.
• We launched a new global advertising campaign Strengthening our already strong system — In 1997,
called “Welcome to the World” and new graphics that we accelerated efforts to put our global production and
communicate the intense taste and fun–loving distribution in the hands of bottling partners who share
attitude of Fanta. our focus on increasing consumption and building
share–owner value.
In addition to our powerful core brands, we’re also Together with these partners, we’re increasing
building our strong team of international and local unit case volume, marketing our brands more effectively
brands. Earlier this year, we introduced new flavors for and increasing efficiencies in production, distribution
POWERa–DE — “Green Squall,” with the tastes of kiwi, and marketplace execution. We increased our ownership

21
stake in Mexico’s third–largest bottler, Grupo understand that such value creation depends on our
Continental, S.A., and in three Chilean–based bottlers, ability to consistently identify new growth opportunities
Embotelladora Andina S.A., Embotelladoras Polar S.A. and to develop innovative ways to convert those opportu–
and Embotelladora Arica, S.A. With investments such as nities into value.
these, we’re moving ever closer to our long–held goal of To do that, the Coca–Cola Learning Consortium contin–
putting our products “within an arm’s reach of desire.” ues to institute processes and frameworks to enhance
At the same time, we’re accelerating our efforts to
ensure that we can satisfy that desire with a beverage
that’s ice–cold. Much of the world still drinks our bever–
ages at room temperature, even though our products
taste best when served cold. By placing vending
machines and coolers in high–traffic areas, we increase
cold availability of our products and stimulate impulse
sales. Last year alone, our system added 1 million
pieces of cold–drink equipment around the world.

Leveraging our financial structures and strategies —

Our concentrate business generates substantial cash but
consumes relatively little, because our capital is largely
in place. That simple fact, along with our strategic use of our skills and capabilities. We’re also taking a number of
debt, provides us with exceptional financial resources to steps to ensure that we deploy the right people in the
continue strengthening our business. right places. One such step: establishing talent develop–
In 1997 alone, we generated $4 billion in operating ment committees to oversee the strategic placement and
cash flow, while our year–end net debt –to–net capital development of our top performers.
position was just 22 percent, leaving us with These actions already are having an impact on our
considerable flexibility for 1998 and beyond. Consistent business. In the Middle and Far East, for example, we
with our long–held policy, we continue to invest our continue to strengthen our leadership team by rotating
operating cash flow in three ways: 1) We reinvest in our experienced managers into key positions. We’ve also
system to build our capabilities and capacities around created a new division to focus exclusively on our
the globe — helping to build bottling and concentrate opportunities in India. That emphasis on identifying
plants, implement and update information systems, and and developing top performers throughout our system
purchase trucks, coolers, venders and other equipment; will continue to be a priority in 1998 and beyond.
2) we pay dividends; and 3) we buy back our own stock.
THE NEXT BILLION

MINDSET In the following pages, you’ll read more about our global
Integral to our success in the nearly 200 countries where opportunities and how we’re building momentum for
we do business are the people of the Coca–Cola system, 1998. Bottom line: We’re already working on our next
who remain intensely focused on creating long–term billion servings per day … and we don’t expect to take
value for our share owners. At every level, our people 112 years to get there.

22
 S A L E S , M A R K E T I N G A N D O P E R AT I O N S

North America Group

GROUP PROFILE BRAND REVIEW

Population: 302 million Coca–Cola classic: Unit Case Sales Up 3 %
Per Capita: 358 Sprite: Unit Case Sales Up 10 %
High Per Capita: Rome, Georgia, at 608 Also Notable: Surge is now available in most of the
Low Per Capita: Buffalo, New York, at 93 United States and continues its
dramatic growth. Unit case sales
SERVINGS PER DAY for Barq’s increased 49 %.
Our Products: 296 million
All Others*: 2 billion
*All other beverages, including tap water.

MARKET HIGHLIGHTS KEY OPPORTUNITIES

United States — Coca–Cola USA recorded significant North American System — Bottlers in New York and
gains in volume and share of sales in 1997, as we Canada were sold to Coca–Cola Enterprises Inc., the
continued to move toward our destination of a “true world’s largest bottler, in 1997, laying the groundwork for
360–degree Coca–Cola landscape” — utilizing our “Three strong performance and even stronger growth there in
P’s” strategy of preferred brands, pervasive penetration the years ahead.
and price relative to value. For example, to build perva–
Promotions — We continue to connect with consumers
siveness of our products, we’re putting ice–cold
in exciting new ways, whether through tie–ins with movies;
Coca–Cola classic and our other brands within reach,
unique, Coca–Cola themed attractions at sports venues;
wherever you look: at the supermarket, the video store,
or innovative promotions. In 1998, look for creative pro–
the soccer field, the gas station — everywhere.
motions involving Coca–Cola classic, NASCAR auto racing
Core Brands — Sales of Coca–Cola classic increased and several of NASCAR’s most popular drivers.
by nearly 50 million unit cases. Our giant summertime
Fruitopia — Our popular 4–year–old fruit beverage brand
promotion, Coca–Cola Incredible Summer, helped drive
now comes in a new plastic bottle and can be produced by
hot–weather sales with cash prizes. Meanwhile, Sprite
our local bottling partners, dramatically lowering costs.
maintained its strong momentum, with its fourth straight
year of double–digit growth; it is now the fifth–largest
brand in the United States, and places second in
teen–preference surveys, behind only Coca–Cola classic.

Fountain — Coca–Cola Fountain continued to be a

strong contributor to our success in 1997 by creating
customer value through our brands and total customer
service. We enhanced our ability to maximize soft–drink 6%
sales and profits over time by strengthening our core
brands and expanding our product line with Surge, 1%
Minute Maid Original Style Lemonade, Nestea Flavors,
Hi–C and our brands in frozen form. In addition, we
further solidified numerous customer relationships
through long–term agreements and made significant 6%

infrastructure investments, including restructured

customer teams, strengthened supplier agreements 1%
and new state–of–the–art manufacturing capabilities.
*Rest of Industry includes soft drinks only.

23
 Latin America Group

GROUP PROFILE BRAND REVIEW

Population: 481 million Coca–Cola: Unit Case Sales Up 8%
Per Capita: 187 Sprite: Unit Case Sales Up 9%
High Per Capita: St. Maarten at 645 Also Notable: diet Coke/Coca–Cola light grew 29%.
Low Per Capita: Haiti at 12

SERVINGS PER DAY

Our Products: 247 million
All Others*: 4 billion
*All other beverages, including tap water.

Growth Rate: 1997 vs. 1996 difficult environment, our volume in Brazil was up
Latin America Group Unit Case Sales 2 percent against the previous year and our per capita
Argentina 13 % was 134. Our system has invested $1.4 billion in infra–
Brazil 2% structure and marketing in Brazil during the past
Chile 13 % three years, and we’ll continue to focus on building our
Colombia 5% business there.

Mexico 11 %
Alignment with Bottlers — Our system is rapidly build–
Total 12 %
ing a more efficient network of fewer, stronger bottlers;
the number of bottlers in the Group was reduced from 87
MARKET HIGHLIGHTS
to 80 in 1997 alone. Further evidence of our progress in
Mexico — Our system’s focus and investment in Mexico,
aligning our bottling system: For the first time, we’ve
one of our so–called “mature markets,” generated
developed a single business plan with our top three Latin
strong growth. Per capita consumption reached 371 in
American bottlers — Coca–Cola FEMSA, Panamerican
1997 — more than one drink per day per person. We
Beverages and Embotelladora Andina.
believed in Mexico during its economic crisis earlier this
In 1997, we also formed the VeneCol Division (a
decade, maintaining our investment. That commitment
Company operating division encompassing Venezuela and
has resulted in a 67 percent share of sales and a
Colombia), fully matching our Company structure with that
stronger system.
of our Latin American bottling system for the first time.
Venezuela — 1997 saw Venezuela’s continued success
and further system alignment, with the acquisition of
Latin America Group
Embotelladora Coca–Cola y Hit de Venezuela, S.A., by
Panamerican Beverages, one of our anchor bottlers. Our 1997 Unit Case Sales
Venezuelan business sold more than 200 million unit
cases in 1997, up significantly from previous years; in
Other
October alone, we sold more unit cases than in the entire
year of 1995. Our per capita consumption reached 219
Chile Mexico
in 1997, versus only 17 in 1995. And for the first time,
Coca–Cola was named consumers’ preferred soft–drink Colombia
brand in the country.
Venezuela
KEY OPPORTUNITIES
Brazil — Just as we recognized the potential of Mexico Argentina
during its economic crisis a few years ago, we now see
opportunity for investment in Brazil. In 1997, even in a

Brazil

24
 S A L E S , M A R K E T I N G A N D O P E R AT I O N S

Middle and Far East Group

GROUP PROFILE BRAND REVIEW

Population: 3.6 billion Coca–Cola: Unit Case Sales Up 12%
Per Capita: 19 Sprite: Unit Case Sales Up 13%
High Per Capita: Guam at 302 Also Notable: Fanta grew 11%.
Low Per Capita: Laos at less than 1

SERVINGS PER DAY

Our Products: 186 million
All Others*: 29 billion
*All other beverages, including tap water.

Growth Rate: 1997 vs. 1996 the U.S. dollar. The Company has a solid growth plan in
Middle and Far East Group Unit Case Sales place across the Group — and a real opportunity to keep
Australia 4% investing in depressed markets. For example, to upgrade
China 30 % and refocus our system in South Korea, we purchased
India 5% bottling operations in that country. (Early in 1998,
Indonesia 13 % Coca–Cola Amatil announced its intention to acquire

Japan 5% these operations.)

Korea (2)% China — The world’s most populous country is now

Middle East and North Africa Division 17 % one of The Coca–Cola Company’s top 10 volume markets.
Philippines 14 % By mid–1998, 27 Coca–Cola production facilities will be
Thailand 6% up and running, completing the current building phase of
Total 10 % our Chinese business plan. We have moved our focus
from building to selling, and the opportunities for our
MARKET HIGHLIGHTS expanding system are evident: Shanghai, one of our first
Philippines — Volume rose a very strong 14 percent in Chinese markets, has a per capita of 66, while Qingdao,
1997, despite economic difficulties, pricing pressures a new location for us, registers just 10. To serve the
and significantly accelerated competition. Our system nation, we’re opening more than 180 new distribution
opened its 21st bottling plant in the nation, part of a centers by 2000, most in cities of 1 million or more.
five–year, multi–million dollar expansion program designed
to further strengthen our position there.
Middle and Far East Group
Middle East and North Africa Division — We took 1997 Unit Case Sales
soft–drink leadership across this division, from Morocco
to the Gulf, in 1997 — and we’re pulling up close in the
Other
heart of the Middle East, long a stronghold of our leading
Indonesia Japan
international soft–drink competitor. This marks dramatic 10%
India 3%
and quick progress, as we did little or no business in 4%
28%

many of these countries just a few years ago. Korea

5%

KEY OPPORTUNITIES Thailand 6%

Currency and Investment — We’re seeing more growth

7%
and stronger opportunity in Asia, despite economic Australia 14%
woes in several key countries, which hampered our earn– 11% Philippines
12%
ings in 1997; numerous local currencies, including China
those in Thailand, Korea and Indonesia, suffered against Middle East and
North Africa Division

25
 Greater Europe Group

GROUP PROFILE BRAND REVIEW

Population: 858 million Coca–Cola: Unit Case Sales Up 9%
Per Capita: 89 Sprite: Unit Case Sales Up 25%
High Per Capita: Iceland at 417 Also Notable: Fanta is the No. 2 soft drink, behind
Low Per Capita: Tajikistan at less than 1 Coca–Cola; Sprite is the No. 5
major soft–drink brand.
SERVINGS PER DAY
Our Products: 209 million
All Others*: 7 billion
*All other beverages, including tap water.

Growth Rate: 1997 vs. 1996 KEY OPPORTUNITIES

Greater Europe Group Unit Case Sales Increasing Consumption — In more–established
East Central European Division 15 % European locales — countries where we’ve been for
France 18 % decades, such as the United Kingdom and Germany —
Germany 2% we’re seeking to increase consumption incidence among
Great Britain 3% consumers who already enjoy our products. For exam–
ple, in Germany, the land of bier, only 46 percent of
Italy 12 %
households bring home Coca–Cola products annually —
Nordic & Northern Eurasia Division 30 %
and only 15 percent do so every month. We’re focusing
Spain 11 %
on the times and places that are right for a Coca–Cola,
Total 11%
such as train stations, which attract an estimated
1.3 billion German travelers each year.
MARKET HIGHLIGHTS
France — Under the leadership of Coca–Cola Enterprises, Attracting New Consumers — Meanwhile, in newer
strong marketplace execution produced strong results: European markets such as Russia, our opportunity is to
volume growth of 18 percent. Relevant consumer promo– use our new, strong system to attract new consumers.
tions, including key campaigns with football and the World To that end, our system opened four new Russian plants
Cup, helped drive sales. Our Company’s share of soft–drink in October, completing a $650 million investment plan
sales in France is up 8 percentage points since 1994. that has doubled our capacity in key population centers.

Turkey — Volume grew 32 percent in 1997, with share of

sales up 14 percentage points since 1994. These results Greater Europe Group
reflect our focus on brands and market execution, 1997 Unit Case Sales
particularly on successful promotions for Fanta and
Sprite. We also focused on opportunities to associate
Coca–Cola with family and friends at the Ramadan holi– Other
Germany
day. As a system, we will invest $400 million over the
14%
next few years to double our volume in Turkey. France 22%
7%
Russia — A year after taking the lead, we raced ahead of
our soft–drink competition in 1997. Coca–Cola and Sprite Italy 7%
now each outsell all the brands of our leading interna–
tional soft–drink competitor combined. 21% East Central
9%
Great Britain European
Division
10%
10%
Nordic &
Northern
Eurasia Spain
Division

26
 S A L E S , M A R K E T I N G A N D O P E R AT I O N S

Africa Group

GROUP PROFILE BRAND REVIEW

Population: 594 million Coca–Cola: Unit Case Sales Up 15%
Per Capita: 27 Sprite: Unit Case Sales Up 25%
High Per Capita: Seychelles at 290 Also Notable: Fanta grew 10% in Southern Africa and
Low Per Capita: Ethiopia at 2 12% in Northern Africa.

SERVINGS PER DAY

Our Products: 44 million
All Others*: 5 billion
*All other beverages, including tap water.

Growth Rate: 1997 vs. 1996 Hot Climate, Young Consumers, Young Business — Our
Africa Group Unit Case Sales business in Africa is indeed in its infancy. The low per
Northern Africa Division 13 % capita consumption of our products, the warm climate
Southern Africa Division 11 % and the youth of African consumers (the average age
Total 12 % is 20) are all signs of our opportunity on the continent.
In countries such as Tanzania, Mozambique and
MARKET HIGHLIGHTS
Uganda, we’re working with our anchor bottler,
South Africa — The 10th largest market in the world Coca–Cola Sabco (Proprietary) Limited, investing heavily
for Coca–Cola products continued its recent growth, in infrastructure to take advantage of the tremendous
demonstrating the strength of our system and our peo– opportunity found in these evolving markets.
ple. South Africa’s per capita consumption increased Cold Drink — To bring more of our products to more con–
to 155 in 1997. Across the Southern Africa region, sumers than ever before, our system installed more than
strong marketing campaigns and media efforts have 50,000 pieces of cold–drink equipment throughout Africa
spurred sales, with solid growth for Coca–Cola, Sprite, in 1997. In Africa’s climate, the appeal of serving The
Fanta and POWERa – DE.
Real Thing ice–cold can’t be overemphasized.
West Africa — We’re making significant progress
in aligning our distribution and marketing efforts with
key bottlers. Sales of Coca–Cola and Sprite have doubled Africa Group
in West Africa in less than three years. 1997 Unit Case Sales

KEY OPPORTUNITIES
Smaller Local Customers — We launched a new strategy
focused not just on large customers, but also on
microbusinesses — small customers who sell our prod–
Northern
ucts from street corners, kiosks or even their homes.
Africa
These microbusinesses represent our greatest oppor– Division
45%
tunity in Africa, as they reach more and more of our
consumers every day. Our products account for a signifi– 55% Southern
cant and important portion of their profits, strengthening Africa
Division
the local communities where we do business.

27
 The Minute Maid Company

GROUP PROFILE
Number of Countries Served: 24
Total Population Served: 986 million
Per Capita: 10
Servings Per Day: 28 million

MARKET HIGHLIGHTS KEY OPPORTUNITIES

United States — A significant increase in our marketing United States and Abroad — The Minute Maid Company
investment in support of the new taste of Minute Maid is the world’s leading marketer of juices and juice drinks,
Premium ready–to–drink orange juice boosted volume yet accounts for just a small percentage of global juice
8 percent for that product line; profit margins increased and juice–drink sales. We’re working to increase our sales
as well. At the same time, through the formation of our in the United States — in part by making Minute Maid
“anchor broker” network, we upgraded our ability Premium orange juice synonymous with breakfast — and
to execute our marketing programs in the retail store, to reach millions of new consumers outside of the
dramatically improving our presence with consumers at United States. Look for further international expansion of
the point of sale. Minute Maid in 1998.
As expected, total Minute Maid share of retail sales
An Increasingly Powerful System — Much like
declined due to the elimination of our not–from–
the broader Coca–Cola system, the one–two punch of
concentrate product, but consumer preference for
powerful brands and powerful partners — including
the new ready–to–drink taste bodes very well for our
Danone and juice supplier Sucocitrico Cutrale Ltda. —
future growth.
points to tremendous opportunity. The Minute Maid
Brand Building — Several ambitious marketing efforts Company is on a firm strategic course to become —
helped drive sales and brand awareness for Minute Maid in literally and figuratively — “The Coca–Cola Company of
1997, including an energetic ad campaign (“Bite Into It”) juices worldwide.”
and sponsorship of the 1998 Olympic Winter Games in
Nagano. During the Games, consumers had the chance to
win a lifetime of trips to the Olympics in our “Drink, Watch
& Win — A Journey for a Lifetime” promotion.
And, again this year, we’re linking the Minute Maid
brand name with the bed–and–breakfast experience in a
promotion that offers consumers the chance to win their
own bed–and–breakfast inn.

International Expansion — Minute Maid Danone, our

new joint venture with food giant Groupe Danone,
launched Minute Maid Premium refrigerated juices into
five European countries, backed by significant advertising
and promotional activities. Those efforts have had imme–
diate results: Minute Maid is already the No. 1 juice in
Spain, and No. 3 in France.

28
 S A L E S , M A R K E T I N G A N D O P E R AT I O N S

1997 Worldwide Unit Case 1997 Worldwide

Volume by Region Beverage Consumption*

Worldwide Total: 14.9 Billion All Alcohol Fruit

Other Juices
Africa Group Milk &
6% 7%
3% Dairy

Greater 7% Other
Europe 5% North Soft Drinks
Group America 2%
Group 2% KO
Products
21% 30%

42%
31%

Water Coffee
25% & Tea
19%

Latin
Middle &
America
Far East
Group
Group
*Sources: A.C. Nielsen, industry estimates and 52-country
survey of consumer drinking habits.

1997 Worldwide Leadership by Country

Leadership Second
Leader Margin** Place

Australia Coca-Cola 3.7:1 diet Coke

Belgium Coca-Cola 5.2:1 Coca-Cola light
Brazil Coca-Cola 4.4:1 Brazilian Brand
Chile Coca-Cola 5.0:1 Fanta
France Coca-Cola 5.1:1 French Brand***
Germany Coca-Cola 3.3:1 Fanta
Great Britain Coca-Cola 1.5:1 diet Coke
Greece Coca-Cola 3.7:1 Fanta
Italy Coca-Cola 2.9:1 Fanta
Japan Coca-Cola 3.6:1 Fanta
Korea Coca-Cola 2.9:1 Korean Brand
Norway Coca-Cola 4.8:1 Coca-Cola light
South Africa Coca-Cola 6.3:1 Sparletta
Spain Coca-Cola 3.5:1 Fanta
Sweden Coca-Cola 5.4:1 Fanta

Share of soft-drink sales. Source: Company data/store audit data.

**Over second-place brand.
***Orangina, a brand that we have announced plans to acquire.

29
 Our World of Opportunity

Worldwide, we’re already focused on our next billion drinking our products less than once a week. Even in
servings. Seventy percent of the world’s population our more developed countries, like the United States,
live in countries where our per capita consumption is we have ample opportunity to increase the number of
less than 50 servings per person per year — they’re occasions when people enjoy our products every day.

30
 S A L E S , M A R K E T I N G A N D O P E R AT I O N S

Per Capita Consumption and

Market Populations

Population Per
Market in Millions Capita*

China 1,244 6
India 960 3
United States 272 376
Indonesia 203 10
Brazil 163 134
Russia 148 21
Japan 126 150
Mexico 94 371
Germany 82 203
Philippines 71 130
Egypt 64 28
France 59 88
Thailand 59 69
Great Britain 57 118
Italy 57 95
Korea 46 71
South Africa 43 155
Spain 40 201
Colombia 37 116
Argentina 36 207
Benelux/Denmark 32 196
Canada 30 196
Morocco 28 61
Romania 23 57
Venezuela 23 219
Australia 18 276
Chile 15 325
Zimbabwe 12 69
Hungary 10 153
Israel 6 267
Norway 4 272

*Eight–ounce servings of Company beverages per

person per year (excludes products distributed
by The Minute Maid Company).
Per Capita Consumption:

Over 200 50-125

125-200 Under 50

31
S A L E S , M A R K E T I N G A N D O P E R AT I O N S

Selected Market Results: Estimated 1997 Volume

Unit Case1 Growth Soft Drinks Total Beverages2

10-Year Average 5-Year Average 1997 1997 1997
Annual Growth Annual Growth Annual Growth Company
Company Company Per Capita
Company3 Industry4 Company3 Industry4 Company3 Industry4 Share4 Share Consumption
5

Worldwide 7% 4% 8% 4% 9% 5% 50% 2% 61

North America Group 6

5 3 6 3 6 3 44 12 358

United States 5 3 6 3 6 3 44 13 376

Greater Europe Group 9 3 8 4 11 6 48 3 89

East Central Europe 19 10 22 11 15 10 46 2 57

France 13 5 10 3 18 9 55 3 88

Germany 6 2 2 0 2 1 57 7 203

Great Britain 7 4 5 2 3 3 34 4 118

Italy 3 4 0 4 12 7 45 3 95
Nordic & Northern Eurasia 15 (3) 20 6 30 9 41 1 37

Spain 7 4 5 3 11 6 56 7 201

Middle and Far East Group7 9 7 11 8 10 6 43 1 19

Australia 6 3 6 4 4 7 63 9 276

China 41 13 35 14 30 14 30 0 6

Japan 7
6 0 4 (1) 5 1 37 5 150

Korea 5 4 1 0 (2) 3 57 2 71

Middle East & North Africa 9 5 16 5 17 (1) 38 1 28

Philippines 7 6 10 11 14 18 73 4 130

Africa Group 6 4 6 3 12 11 79 1 27

Northern Africa 6 2 7 2 13 12 79 1 15

Southern Africa 7 5 5 3 11 10 80 3 80

Latin America Group 7 4 9 6 12 7 60 6 187

Argentina 4 2 5 4 13 13 62 7 207

Brazil 6 6 11 14 2 4 52 5 134

Chile 15 13 14 9 13 9 72 11 325

Colombia 3 (2) 4 (4) 5 (7) 58 4 116

Mexico 8 4 7 2 11 6 67 13 371

1
Unit case equals 24 eight–ounce servings.
2
Consists of all beverages, including tap water.
3
Derived from unit case volume.
4
Includes soft drinks only.
5
Derived by dividing our unit case volume in ounces in a given market by the product of that market’s population multiplied by the
commonly accepted norm for daily fluid intake, 64 ounces, multiplied by the number of days in a year.
6
Consists of United States and Canada.
7
Company share of soft drinks includes our noncarbonated beverages in Japan and conforms with Japanese industry standards.

32
 Financial Review Incorporating
Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Our mission is to maximize share-owner value over time. approximately 50 percent of our 1997 worldwide unit case
To create long-term value, The Coca-Cola Company and its volume while controlled bottling and fountain operations
subsidiaries (our Company) execute a comprehensive business produced and distributed approximately 13 percent of 1997
strategy driven by four key objectives. We strive to (1) increase worldwide unit case volume.
volume, (2) expand our share of beverage sales worldwide, The reason we invest in bottling operations is to maximize
(3) maximize our long-term cash flows and (4) improve the strength and efficiency of our production, distribution and
economic profit and create economic value added. We achieve marketing systems around the world. These investments often
these goals by strategically investing in the high-return result in increases in unit case volume, net revenues and profits
beverages business and by optimizing our cost of capital at the bottler level, which in turn generate increased gallon
through appropriate financial policies. shipments for our concentrate business. As a result, both our
Company and the bottlers benefit from long-term growth in
Investments volume, improved cash flows and increased share-owner value.
With a global business system that operates in nearly 200 The level of our investment generally depends on the bottler’s
countries and generates superior cash flows, our Company is capital structure and its available resources at the time of our
uniquely positioned to capitalize on profitable new investment investment. In certain situations, it can be advantageous to
opportunities. Our criterion for investment is simple: New acquire a controlling interest in a bottling operation. Although
investments must directly enhance our existing operations and it is not our primary long-term business strategy, owning a
must be expected to provide cash returns that exceed our controlling interest allows us to compensate for limited local
long-term, after-tax, weighted-average cost of capital, currently resources and enables us to help focus these bottlers’ sales and
estimated at approximately 11 percent. marketing programs, assist in developing their business and
Because it consistently generates high returns, our business, information systems, and establish appropriate capital structures.
beverages, is a particularly attractive investment for us. In In 1997, we purchased the bottling assets of three South
emerging and still-developing markets, our Company’s main Korean bottlers. Also in 1997, the Indian government approved
objective is to increase the penetration of our products. In our plan to invest in Indian bottling operations, allowing us to
these markets, the bulk of our investments are for infrastruc- set up an integrated bottling system in India. Previously, we
ture enhancements such as production facilities, distribution acquired controlling interests in certain bottling operations in
networks, sales equipment and technology. We make these Italy in 1996 and 1995. By providing capital and marketing
investments by acquiring or forming strategic business expertise to newly acquired bottlers, we strengthen their ability to
alliances with local bottlers and by matching local expertise deliver our Company’s brands to customers and consumers.
with our experience, resources and focus. In highly developed In line with our long-term bottling strategy, we periodically
markets, our expenditures are primarily for marketing activities. consider options for reducing our ownership interest in a
Currently, 50 percent of the world’s population live in markets consolidated bottler. One option for reducing our ownership
where the average person consumes fewer than 10 servings of our interest is to combine our bottling interests with the bottling
beverages per year. For example, the emerging markets of China, interests of others to form strategic business alliances. Another
India, Indonesia and Russia represent approximately 44 percent option is to sell our interest in a consolidated bottling operation
of the world’s population, yet, on a combined basis, the average to one of our equity investee bottlers. In both of these situations,
per capita consumption of our products in these markets is less we continue participating in the previously consolidated bottler’s
than 2 percent of the United States’ level. We continue to invest earnings through our portion of the equity investee’s income.
aggressively in these areas. Consistent with our strategy, in early 1998, we announced a
Our investment strategy focuses on the four fundamental proposal for our consolidated bottling operations in northern
components of our business: bottling operations, capital and central Italy to become part of a new publicly traded
expenditures, marketing activities and people. European bottler, Coca-Cola Beverages. Coca-Cola Beverages
will be formed upon the completion of a proposed spin-off by
Bottling Operations — Our Company has business relation- Coca-Cola Amatil Limited (Coca-Cola Amatil) of its European
ships with three types of bottlers: (1) independently owned operations. After the spin-off, these Italian bottling operations
bottlers, in which we have no ownership interest; (2) bottlers will be acquired by Coca-Cola Beverages for both cash and
in which we have invested and have a noncontrolling ownership shares of Coca-Cola Beverages stock in a transaction valued at
interest; and (3) bottlers in which we have invested and have a approximately $979 million. Additionally, once the proposed
controlling ownership interest. spin-off has been completed, our bottling operations in South
During 1997, independently owned bottling operations Korea will be acquired by Coca-Cola Amatil for shares of stock
produced and distributed approximately 37 percent of our in Coca-Cola Amatil in a transaction valued at approximately
worldwide unit case volume. Bottlers in which we own a non- $588 million. The proposed transactions are subject to certain
controlling ownership interest produced and distributed conditions, including approvals by holders of ordinary shares

33
Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

of Coca-Cola Amatil stock and applicable regulatory authorities. bottler in Great Britain; our 48 percent interest in Coca-Cola
In 1996, we sold our consolidated bottling and canning Beverages Ltd. of Canada; and our 49 percent interest in The
operations in France and Belgium to Coca-Cola Enterprises Inc. Coca-Cola Bottling Company of New York, Inc.
(Coca-Cola Enterprises). We also formed a strategic business In line with our established investment strategy, our bottling
alliance in Germany, Coca-Cola Erfrischungsgetränke AG investments have been profitable over time. For bottling invest-
(CCEAG), in 1996 through the merger of our then wholly ments that are accounted for by the equity method, we
owned east German bottler with three independent bottlers. In measure the profitability of our bottling investments in two ways
1997, we merged our consolidated bottling operation in — equity income and the excess of the fair values over the carry-
Germany, Coca-Cola Rhein-Ruhr, into CCEAG. Currently, we ing values of our investments. Equity income, which is included
have a 45 percent interest in CCEAG. in our consolidated net income, represents our share of the net
Also in 1996, we combined our bottling interests in earnings of our investee companies. In 1997, equity income was
Venezuela with the Cisneros Group’s bottling companies to $155 million. The following table illustrates the excess of the
form a new joint venture, Embotelladora Coca-Cola y Hit calculated fair values, based on quoted closing prices of publicly
de Venezuela, S.A. (Coca-Cola y Hit). In 1997, our Company traded shares, over our Company’s carrying values for selected
and the Cisneros Group sold our respective interests in equity method investees (in millions):
Coca-Cola y Hit to Panamerican Beverages, Inc. (Panamco) in Fair Carrying
exchange for shares of Panamco stock. At the completion of December 31, Value Value Excess
this transaction, our ownership in Panamco was approximately 1997
23 percent, and we began accounting for our investment by the Coca–Cola Enterprises Inc. $ 6,008 $ 184 $ 5,824
equity method. Coca–Cola Amatil Limited 2,122 1,204 918
As stated earlier, our investments in a bottler can represent Panamerican Beverages, Inc. 924 735 189
either a noncontrolling or a controlling interest. Through non- Coca–Cola FEMSA, S.A. de C.V. 827 87 740
controlling investments in bottling companies, we provide Grupo Continental, S.A. 272 89 183
expertise and resources to strengthen those businesses. In 1997, Coca–Cola Bottling Co. Consolidated 171 71 100
we increased our interest in Grupo Continental, S.A., a bottler $ 7,954
in Mexico, from 18 percent to 20 percent; our interest in
Embotelladoras Polar S.A., a bottler headquartered in Chile, The excess of calculated fair values over carrying values for
from 17 percent to 19 percent; and our interest in our investments illustrates the significant increase in the value
Embotelladora Andina S.A., another bottler headquartered in of our investments. Although this excess value for equity
Chile, from 6 percent to 11 percent. method investees is not reflected in our consolidated results of
Certain bottling operations in which we have a noncontrolling operations or financial position, it represents a true economic
ownership interest are designated as “anchor bottlers” due to benefit to us.
their level of responsibility and performance. Anchor bottlers are
strongly committed to their own profitable growth which, in Capital Expenditures — Capital expenditures for property,
turn, helps us meet our strategic goals and furthers the interests plant and equipment and the percentage distribution by
of our worldwide production, distribution and marketing geographic area for 1997, 1996 and 1995 are as follows
systems. Anchor bottlers tend to be large and geographically (in millions):
diverse with strong financial and management resources. In
Year Ended December 31, 1997 1996 1995
1997, our anchor bottlers produced and distributed approxi-
Capital expenditures $ 1,093 $ 990 $ 937
mately 38 percent of our total worldwide unit case volume.
North America 24% 27% 31%
Anchor bottlers give us strong partners on every major continent.
Africa 2% 3% 2%
Upon its formation, Coca-Cola Beverages, the Coca-Cola
Greater Europe 30% 38% 41%
Amatil spin-off which will operate in Europe, will be designated
Latin America 7% 8% 9%
as our tenth anchor bottler. Additionally, we designated
Middle & Far East 18% 12% 9%
Coca-Cola Nordic Beverages (CCNB) as an anchor bottler in
Corporate 19% 12% 8%
1997. CCNB, a joint venture in which Carlsberg A/S will own a
51 percent interest and we will own a 49 percent interest, has
bottling operations in Denmark and Sweden. In 1996, our Company launched Project Infinity, a strategic
In 1997, our Company and San Miguel Corporation business initiative utilizing technology to integrate business
(San Miguel) sold Coca-Cola Bottlers Philippines, Inc. to systems across our global enterprise over the next several years.
Coca-Cola Amatil in exchange for shares of Coca-Cola Amatil In 1997, we began testing a limited version of the Project
stock. Also in 1997, we sold to Coca-Cola Enterprises our Infinity software technology and anticipate rolling it out to
49 percent interest in Coca-Cola & Schweppes Beverages Ltd., a certain divisions in late 1998. Project Infinity will enhance

34
Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

our competitiveness by supplying immediate, detailed infor- Financial Strategies

mation about our financial position and the marketplace to our We use several strategies to optimize our cost of capital, which is
management, associates and bottlers worldwide. By giving our a key component of our ability to maximize share-owner value.
people real-time data, Project Infinity will increase our ability
to recognize opportunities and make better and faster decisions Debt Financing — Our Company maintains debt levels
about operations, marketing and finance. Project Infinity will considered prudent based on our cash flow, interest coverage
require significant capital expenditures over the next several and percentage of debt to capital. We use debt financing to
years. All related costs of business process reengineering lower our overall cost of capital, which increases our return
activities have been expensed as incurred. on share-owners’ equity.
In December 1997, our Company signed a letter of intent with Our capital structure and financial policies have earned long-
beverage company Pernod Ricard to purchase its Orangina term credit ratings of “AA-” from Standard & Poor’s and “Aa3”
brands, three bottling operations and one concentrate plant in from Moody’s, and the highest credit ratings available for our
France for approximately 5 billion French francs (approximately commercial paper programs.
$850 million based on December 1997 exchange rates). This Our global presence and strong capital position give us easy
transaction is subject to approvals from regulatory authorities. access to key financial markets around the world, enabling us
to raise funds with a low effective cost. This posture, coupled
Marketing Activities — In addition to investing in our bottling with the active management of our mix of short-term and
and distribution infrastructure, we make significant expenditures long-term debt, results in a lower overall cost of borrowing.
in marketing to support our trademarks. We define marketing as Our debt management policies, in conjunction with our share
anything we do to create consumer demand for our brands. We repurchase programs and investment activity, typically result in
focus on continually finding new ways to differentiate our prod- current liabilities exceeding current assets.
ucts and build value into all our brands. Marketing spending In managing our use of debt capital, we consider the
enhances consumer awareness and increases consumer preference following financial measurements and ratios:
for our brands. This produces growth in volume, per capita con-
Year Ended December 31, 1997 1996 1995
sumption and our share of worldwide beverage sales.
Net debt (in billions) $ 2.0 $ 2.8 $ 2.6
We heighten consumer awareness and product appeal
Net debt–to–net capital 22% 31% 32%
for our trademarks using integrated marketing programs.
Free cash flow to net debt 172% 85% 82%
Through our bottling investments and strategic alliances
Interest coverage 22x 17x 16x
with other bottlers of our products, we create and implement
Ratio of earnings to
these programs worldwide. In developing a global strategy
fixed charges 20.8x 14.9x 14.5x
for a Company trademark, we conduct product and packag-
ing research, establish brand positioning, develop precise
consumer communications and solicit consumer feedback. Net debt is debt in excess of cash, cash equivalents and
Our integrated marketing programs include activities such as marketable securities not required for operations and certain
advertising, point-of-sale merchandising and product sampling. temporary bottling investments.
To maximize the impact of our advertising expenditures, we
assign specific brands to individual advertising agencies. This Share Repurchases — Our Company demonstrates confidence
approach enables us to increase accountability and enhance each in the long-term growth potential of our business by our contin-
brand’s global positioning. ued and consistent use of share repurchase programs. In 1992,
our Board of Directors authorized a plan to repurchase up to
People — Our continued success depends on recruiting, training 200 million shares of our Company’s common stock through the
and retaining people who can quickly identify and act on year 2000. In 1997, we repurchased approximately 20 million
profitable business opportunities. This means maintaining and shares under the 1992 plan. Through 1997, we had repurchased
refining a corporate culture that encourages learning, innovation 187 million shares under the 1992 plan.
and value creation on a daily basis. The Coca-Cola Learning In October 1996, our Board of Directors authorized a new
Consortium works with the management of our entire system program to repurchase 206 million additional shares through
to foster learning as a core capability. This group helps build the the year 2006.
culture, systems and processes our people need to develop the Since the inception of our initial share repurchase program in
knowledge and skills to take advantage of new opportunities. 1984 through our current program as of December 31, 1997,
we have repurchased more than 1 billion shares, representing
31 percent of the shares outstanding as of January 1, 1984, at
an average price per share of $11.27.

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Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Dividend Policy — At its February 1998 meeting, our Board of prepaid expenses and other assets. These are recognized in
Directors again increased our quarterly dividend to $.15 per income, along with unrealized gains and losses, in the same
share, equivalent to a full-year dividend of $.60 in 1998, our period the hedged transactions are realized. Gains and losses
36th consecutive annual increase. Our annual common stock on derivative financial instruments that are designated and effec-
dividend was $.56 per share, $.50 per share and $.44 per share tive as hedges of net investments in international operations
in 1997, 1996 and 1995, respectively. are included in share-owners’ equity as a foreign currency
In 1997, our dividend payout ratio was approximately translation adjustment.
34 percent of our net income. To free up additional cash for Our value-at-risk calculation estimates foreign currency risk
reinvestment in our high-return beverages business, our Board on our derivative and other financial instruments. We have not
of Directors intends to gradually reduce our dividend payout included in our calculation the effects of currency movements
ratio to 30 percent over time. on anticipated foreign currency denominated sales and other
hedged transactions. According to our calculation, on December
Financial Risk Management 31, 1997, we estimate with 95 percent confidence that the fair
Our Company uses derivative financial instruments primarily value of our derivative and other financial instruments would
to reduce our exposure to adverse fluctuations in interest rates decline by less than $58 million over a one-week period due to
and foreign exchange rates, and to a lesser extent, to reduce our an adverse move in foreign currency exchange rates. However,
exposure to adverse fluctuations in commodity prices and other we would expect that any loss in the fair value of our derivative
market [Link] do not enter into derivative financial instruments and other financial instruments would be generally offset by an
for trading purposes. As a matter of policy, all our derivative increase in the fair value of our underlying exposures.
positions are used to reduce risk by hedging an underlying eco-
nomic exposure. Because of the high correlation between the Interest Rates — Our Company maintains our percentage
hedging instrument and the underlying exposure, fluctuations in of fixed and variable rate debt within defined parameters. We
the value of the instruments are generally offset by reciprocal enter into interest rate swap agreements that maintain the
changes in the value of the underlying exposure. The derivatives fixed/variable mix within these parameters. Any differences paid
we use are straightforward instruments with liquid markets. or received on interest rate swap agreements are recognized as
Our Company monitors our exposure to financial market adjustments to interest expense over the life of each swap.
risks using several objective measurement systems, including Our value-at-risk calculation estimates interest rate risk on
value-at-risk models. For the value-at-risk calculations dis- our derivative and other financial instruments. According to our
cussed below, we used a historical simulation model to estimate calculation, on December 31, 1997, we estimate with 95 percent
potential future losses our Company could incur as a result of confidence that any increase in our net interest expense due to an
adverse movements in foreign currency and interest rates. We adverse move in interest rates over a one-week period would not
have not considered the potential impact of favorable move- have a material impact on our consolidated financial position,
ments in foreign currency and interest rates on our calculations. results of operations or cash flows.
We examined historical weekly returns over the previous
10 years to calculate our value at risk. Our value-at-risk calcu- Performance Tools
lations do not purport to represent the actual losses that our Economic profit and economic value added provide a frame-
Company expects to incur. work by which we measure the value of our actions. We define
economic profit as income from continuing operations after
Foreign Currency — We manage most of our foreign currency taxes, excluding interest, in excess of a computed capital charge
exposures on a consolidated basis, which allows us to net for average operating capital employed. Economic value added
certain exposures and take advantage of any natural offsets. represents the growth in economic profit from year to year.
With approximately 77 percent of our 1997 operating income To ensure that our management team stays clearly focused on
generated outside the United States, weakness in one particular the key drivers of our business, economic value added and eco-
currency is often offset by strengths in others. We use derivative nomic profit are used in determining annual incentive awards
financial instruments to further reduce our net exposure to and long-term incentive awards for most eligible employees.
currency fluctuations. During 1996, we implemented a new tool to help us improve
Our Company enters into forward exchange contracts and our performance — value-based management (VBM).VBM does
purchases currency options (principally European currencies and not replace the economic value added concept; rather, it is a tool
Japanese yen) to hedge firm sale commitments denominated to manage economic profit. It requires us to think about creating
in foreign currencies. We also purchase currency options (princi- value in everything we do, every day.
pally European currencies and Japanese yen) to hedge certain VBM’s principles assist us in managing economic profit by
anticipated sales. Premiums paid and realized gains and losses, clarifying our understanding of what creates value and what
including those on terminated contracts, if any, are included in destroys it and encouraging us to manage for increased value.

36
Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

With VBM, we determine how best to create value in every Operations

area of our business. We believe that using VBM as a planning Net Operating Revenues and Gross Margin — On a consoli-
and execution tool, and economic profit as a performance dated basis, our net revenues increased 1 percent and our
measurement tool, greatly enhances our ability to build share- gross profit grew 8 percent in 1997. The growth in revenues
owner value over time. reflects gallon shipment increases and price increases in
certain markets, offset by the full-year impact of the sale of
Total Return to Share Owners previously consolidated bottling and canning operations in
Our Company has provided share owners with an excellent return France, Belgium and eastern Germany in 1996 as well as the
on their investment over the past decade. A $100 investment in effects of a stronger U.S. dollar. Our gross profit margin
our Company’s common stock on December 31, 1987, together increased to 68 percent in 1997 from 64 percent in 1996,
with reinvested dividends, grew in pretax value to approximately primarily due to the sale in 1996 of previously consolidated
$1,643 on December 31, 1997, an average annual compound bottling operations, which shifted proportionately more
return of 32 percent. revenue to our higher margin concentrate business.
On a consolidated basis, our net revenues grew 3 percent and
our gross profit grew 7 percent in [Link] increase in revenues
Management’s Discussion and Analysis was due primarily to an increase in gallon shipments and
selective price increases offset by a stronger U.S. dollar and the
Our Business disposition of our French, Belgian and east German bottling and
We are the largest manufacturer, distributor and marketer of canning operations. Our gross profit margin increased to
soft-drink beverage concentrates and syrups in the world. Our 64 percent in 1996 from 62 percent in 1995, primarily due
Company manufactures beverage concentrates and syrups and, to the sale of our previously consolidated bottling and canning
in certain instances, finished beverages, which we sell to bot- operations as well as favorable results from changes in our
tling and canning operations, authorized fountain wholesalers product mix. Additionally, gross margins improved in 1996 due
and some fountain retailers. In addition, we have ownership to favorable price variances in raw materials, such as packaging,
interests in numerous bottling and canning operations. We are at our consolidated bottlers.
also the world’s largest distributor and marketer of juice and
juice-drink products. Selling, Administrative and General Expenses — Selling
We own some of the world’s most valuable brands, more expenses were $6,244 million in 1997, $6,018 million in 1996
than 160 brands in all. These include soft drinks and noncar- and $5,508 million in 1995. The increases in 1997 and 1996
bonated beverages such as sports drinks, juice drinks, milk were primarily due to higher marketing expenditures in support
products, water products, teas and coffees. of our Company’s volume growth.
Administrative and general expenses totaled $1,608 million
Volume in 1997, $2,002 million in 1996 and $1,653 million in
We measure our sales volume in two ways: (1) gallon ship- 1995. The decrease in 1997 was principally due to certain
ments of concentrates and syrups and (2) unit cases of finished nonrecurring provisions recorded in 1996, as discussed
product. Gallon shipments represent our primary business and below, partially offset by a $60 million nonrecurring provi-
measure the volume of concentrates and syrups we sell to our sion recorded in 1997 related to enhancing manufacturing
bottling system. Most of our revenues are based on this efficiencies in North America.
measure of “wholesale” activity. We also measure volume in Administrative and general expenses increased in 1996 due
unit cases, which represent the amount of finished product our to certain nonrecurring provisions. In the third quarter of
bottling system sells to retail customers. We believe unit case 1996, we recorded provisions of approximately $276 million
volume more accurately measures the underlying strength of in administrative and general expenses related to our plans for
our business system because it measures trends at the retail strengthening our worldwide system. Of this $276 million,
level. We include fountain syrups sold directly to our customers approximately $130 million related to streamlining our
in both measures. operations, primarily in Greater Europe and Latin America. Our
In 1997, our worldwide unit case volume increased 9 percent, management took actions to consolidate certain manufacturing
on top of an 8 percent increase in 1996. Our business system operations and, as a result, recorded charges to recognize the
sold 14.9 billion unit cases in 1997, an increase of 1.2 billion impairment of certain manufacturing assets and the estimated
unit cases over 1996. Our 1997 results are the product of years losses on the disposal of other assets. The remainder of this
of systematically investing not only in marketing, but also in $276 million provision was for impairment charges to certain
our worldwide infrastructure that includes bottlers, capital, production facilities and reserves for losses on the disposal of
information systems and people. other production facilities of The Minute Maid Company.
Also in the third quarter of 1996, we recorded in administrative

37
Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

and general expenses an $80 million impairment charge to Equity Income — Equity income decreased 27 percent to
recognize Project Infinity’s impact on existing information $155 million in 1997, due primarily to the significant amount
systems and a $28.5 million charge as a result of our decision to of structural change in our global bottling system, which was
make a contribution to The Coca-Cola Foundation, a not-for- partially offset by solid results at key equity bottlers.
profit charitable organization. Equity income increased 25 percent to $211 million in
Administrative and general expenses, as a percentage of 1996, due primarily to stronger operating performances by
net operating revenues, were approximately 9 percent in 1997, Coca-Cola Enterprises, Coca-Cola Beverages Ltd. of Canada and
11 percent in 1996 and 9 percent in 1995. The Coca-Cola Bottling Company of New York, Inc.

Operating Income and Operating Margin — On a consolidated Other Income-Net — In 1997, other income-net increased
basis, our operating income increased 28 percent in 1997, $496 million and includes gains totaling $508 million on
following a 3 percent decrease in 1996. The increase in 1997 the sales of our interests in Coca-Cola & Schweppes Beverages
was due to increased gallon shipments coupled with an increase Ltd., Coca-Cola Beverages Ltd. of Canada and The Coca-Cola
in gross profit margins, as well as the recording of several nonre- Bottling Company of New York, Inc. Gains on other bottling
curring provisions in the third quarter of 1996. In addition, the transactions are also included in other income-net.
curtailment of concentrate shipments decreased 1996 operating In 1996, other income-net increased $1 million and included
income by an estimated $290 million. Our consolidated operat- gains recorded on the sale of our bottling and canning
ing margin was 27 percent in 1997 and 21 percent in 1996. operations in France and Belgium, as well as gains on other
bottling transactions.
Margin Analysis
Gains on Issuances of Stock by Equity Investees — In 1997,
our Company and San Miguel sold our respective interests in
Net Operating Revenues (in billions) Coca-Cola Bottlers Philippines, Inc. to Coca-Cola Amatil in
Gross Margin exchange for approximately 293 million shares of Coca-Cola
Operating Margin Amatil stock. In connection with this transaction, Coca-Cola
Amatil issued to San Miguel approximately 210 million shares
valued at approximately $2.4 billion. The issuance to San
$18.9 $18.7
$18.1
Miguel resulted in a one-time noncash pretax gain for our
Company of approximately $343 million, and resulted in our
36 percent interest in Coca-Cola Amatil being diluted to
approximately 33 percent.
68%
Also in 1997, our Company and the Cisneros Group sold
64% our respective interests in Coca-Cola y Hit to Panamco in
62%
exchange for approximately 30.6 million shares of Panamco
stock. In connection with this transaction, Panamco issued to the
Cisneros Group approximately 13.6 million shares valued at
approximately $402 million. The issuance to the Cisneros Group
27% resulted in a one-time noncash pretax gain for our Company of
21% 22% approximately $20 million. At the completion of this transac-
tion, our ownership in Panamco was approximately 23 percent.
In 1996, Coca-Cola Amatil issued approximately 46 million
shares in exchange for approximately $522 million. This
1997 1996 1995 issuance reduced our ownership in Coca-Cola Amatil from
approximately 39 percent to approximately 36 percent and
resulted in a noncash pretax gain for our Company of approxi-
Interest Income and Interest Expense — In 1997, our interest mately $130 million.
income decreased 11 percent due primarily to decreases in inter- Also in 1996, Coca-Cola Erfrischungsgetränke G.m.b.H.
national interest rates. Interest expense decreased 10 percent in (CCEG), our wholly owned east German bottler, issued new
1997 due to lower average commercial paper borrowings. shares to effect a merger with three independent German
In 1996, our interest income decreased 3 percent, due primar- bottling operations. The shares were valued at approximately
ily to lower average short-term investments and lower average $925 million, based upon the fair values of the assets of the
interest rates in Latin America. Interest expense increased 5 percent three acquired bottling companies. Approximately 24.4 million
in 1996, due to higher average debt balances. shares were issued, resulting in a noncash pretax gain

38
Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

of approximately $283 million for our Company. We own a The consolidated statements of our cash flows are summarized
45 percent interest in the resulting anchor bottler, CCEAG. as follows (in millions):
In 1996, Coca-Cola FEMSA de Buenos Aires, S.A. (CCFBA)
Year Ended December 31, 1997 1996 1995
issued approximately 19 million shares to Coca-Cola FEMSA,
Cash flows provided by (used in):
S.A. de C.V. This issuance reduced our ownership in CCFBA
Operations $ 4,033 $ 3,463 $ 3,328
from 49 percent to approximately 32 percent. We recognized
Investment activities (500) (1,050) (1,226)
a noncash pretax gain of approximately $18 million as a result
Free Cash Flow 3,533 2,413 2,102
of this transaction. In subsequent transactions, our Company
Cash flows used in:
disposed of its remaining interest in CCFBA.
Financing
Share repurchases (1,262) (1,521) (1,796)
Income Taxes — Our effective tax rates were 31.8 percent in
Other financing activities (1,833) (581) (482)
1997, 24.0 percent in 1996 and 31.0 percent in 1995. Our
Exchange (134) (45) (43)
1997 effective tax rate of 31.8 percent reflects tax benefits
Increase (decrease) in cash $ 304 $ 266 $ (219)
derived from significant operations outside the United States,
which are taxed at rates lower than the U.S. statutory rate of
35 percent, partially offset by the tax impact of certain gains Cash provided by operations in 1997 amounted to
recognized from previously discussed bottling transactions. $4.0 billion, a 16 percent increase from 1996. This increase is
These transactions are generally taxed at rates higher than our primarily due to growth in net income in 1997. In 1996, cash
Company’s effective rate on operations. provided by operations amounted to $3.5 billion, a 4 percent
In the third quarter of 1996, our Company reached an agree- increase from 1995. This increase resulted from the continued
ment in principle with the U.S. Internal Revenue Service (IRS) growth of our business and includes the cash effect of signif-
settling certain U.S.-related income tax matters, including issues icant items recorded in 1996. These items have been discussed
in litigation related to our operations in Puerto Rico dating back previously in Management’s Discussion and Analysis on pages
to 1981 and extending through [Link] settlement resulted in 37 through 39.
a one-time reduction of $320 million to our 1996 income tax In 1997, net cash used in investment activities decreased from
expense as a result of a reversal of previously accrued income tax 1996, primarily due to the increase in proceeds from the dis-
liabilities and reduced our effective tax rate in 1996. Excluding posal of investments and other assets including the dispositions
the favorable impact of the settlement with the IRS, our 1996 of our interests in Coca-Cola & Schweppes Beverages Ltd., The
effective tax rate would have been 31.0 percent. Coca-Cola Bottling Company of New York, Inc. and Coca-Cola
Beverages Ltd. of Canada. The growth in proceeds from disposals
Income Per Share — Accelerated by our Company’s share was partially offset by increased acquisitions and investments,
repurchase program, our basic net income per share grew primarily in bottling operations, including the South Korean
19 percent in 1997, 1996 and 1995, and diluted net income bottlers. In 1996, net cash used in investment activities decreased
per share grew 19 percent in 1997, 18 percent in 1996 and from 1995, also due to the increase in proceeds from the
19 percent in 1995. disposal of investments and other assets including the disposi-
tion of our bottling and canning operations in France and
Liquidity and Capital Resources Belgium. The increase in proceeds from disposals was partially
We believe our ability to generate cash from operations in excess offset by significant acquisitions and investments, including our
of our capital reinvestment and dividend requirements is one investment in Coca-Cola y Hit.
of our fundamental financial strengths. We anticipate that our
operating activities in 1998 will continue to provide us with Financing Activities — Our financing activities include net
sufficient cash flows to meet all our financial commitments and borrowings, dividend payments and share repurchases. Net cash
to capitalize on opportunities for business expansion. used in financing activities totaled $3.1 billion in 1997,
$2.1 billion in 1996 and $2.3 billion in 1995. The change
Free Cash Flow — Free cash flow is the cash remaining from between 1997 and 1996 was primarily due to net reductions of
operations after we have satisfied our business reinvestment debt in 1997 compared to net borrowings of debt in 1996. Cash
opportunities. We focus on increasing free cash flow to achieve used to purchase common stock for treasury was $1.3 billion in
our primary objective, maximizing share-owner value over time. 1997 versus $1.5 billion in 1996.
We use free cash flow, along with borrowings, to pay dividends Commercial paper is our primary source of short-term financ-
and make share repurchases. ing. On December 31, 1997, we had $2.6 billion outstanding in
commercial paper borrowings. In addition, we had $.9 billion in
lines of credit and other short-term credit facilities available,
$.1 billion of which was outstanding. The 1997 reduction in

39
Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

of approximately $283 million for our Company. We own a The consolidated statements of our cash flows are summarized
45 percent interest in the resulting anchor bottler, CCEAG. as follows (in millions):
In 1996, Coca-Cola FEMSA de Buenos Aires, S.A. (CCFBA)
Year Ended December 31, 1997 1996 1995
issued approximately 19 million shares to Coca-Cola FEMSA,
Cash flows provided by (used in):
S.A. de C.V. This issuance reduced our ownership in CCFBA
Operations $ 4,033 $ 3,463 $ 3,328
from 49 percent to approximately 32 percent. We recognized
Investment activities (500) (1,050) (1,226)
a noncash pretax gain of approximately $18 million as a result
Free Cash Flow 3,533 2,413 2,102
of this transaction. In subsequent transactions, our Company
Cash flows used in:
disposed of its remaining interest in CCFBA.
Financing
Share repurchases (1,262) (1,521) (1,796)
Income Taxes — Our effective tax rates were 31.8 percent in
Other financing activities (1,833) (581) (482)
1997, 24.0 percent in 1996 and 31.0 percent in 1995. Our
Exchange (134) (45) (43)
1997 effective tax rate of 31.8 percent reflects tax benefits
Increase (decrease) in cash $ 304 $ 266 $ (219)
derived from significant operations outside the United States,
which are taxed at rates lower than the U.S. statutory rate of
35 percent, partially offset by the tax impact of certain gains Cash provided by operations in 1997 amounted to
recognized from previously discussed bottling transactions. $4.0 billion, a 16 percent increase from 1996. This increase is
These transactions are generally taxed at rates higher than our primarily due to growth in net income in 1997. In 1996, cash
Company’s effective rate on operations. provided by operations amounted to $3.5 billion, a 4 percent
In the third quarter of 1996, our Company reached an agree- increase from 1995. This increase resulted from the continued
ment in principle with the U.S. Internal Revenue Service (IRS) growth of our business and includes the cash effect of signif-
settling certain U.S.-related income tax matters, including issues icant items recorded in 1996. These items have been discussed
in litigation related to our operations in Puerto Rico dating back previously in Management’s Discussion and Analysis on pages
to 1981 and extending through [Link] settlement resulted in 37 through 39.
a one-time reduction of $320 million to our 1996 income tax In 1997, net cash used in investment activities decreased from
expense as a result of a reversal of previously accrued income tax 1996, primarily due to the increase in proceeds from the dis-
liabilities and reduced our effective tax rate in 1996. Excluding posal of investments and other assets including the dispositions
the favorable impact of the settlement with the IRS, our 1996 of our interests in Coca-Cola & Schweppes Beverages Ltd., The
effective tax rate would have been 31.0 percent. Coca-Cola Bottling Company of New York, Inc. and Coca-Cola
Beverages Ltd. of Canada. The growth in proceeds from disposals
Income Per Share — Accelerated by our Company’s share was partially offset by increased acquisitions and investments,
repurchase program, our basic net income per share grew primarily in bottling operations, including the South Korean
19 percent in 1997, 1996 and 1995, and diluted net income bottlers. In 1996, net cash used in investment activities decreased
per share grew 19 percent in 1997, 18 percent in 1996 and from 1995, also due to the increase in proceeds from the
19 percent in 1995. disposal of investments and other assets including the disposi-
tion of our bottling and canning operations in France and
Liquidity and Capital Resources Belgium. The increase in proceeds from disposals was partially
We believe our ability to generate cash from operations in excess offset by significant acquisitions and investments, including our
of our capital reinvestment and dividend requirements is one investment in Coca-Cola y Hit.
of our fundamental financial strengths. We anticipate that our
operating activities in 1998 will continue to provide us with Financing Activities — Our financing activities include net
sufficient cash flows to meet all our financial commitments and borrowings, dividend payments and share repurchases. Net cash
to capitalize on opportunities for business expansion. used in financing activities totaled $3.1 billion in 1997,
$2.1 billion in 1996 and $2.3 billion in 1995. The change
Free Cash Flow — Free cash flow is the cash remaining from between 1997 and 1996 was primarily due to net reductions of
operations after we have satisfied our business reinvestment debt in 1997 compared to net borrowings of debt in 1996. Cash
opportunities. We focus on increasing free cash flow to achieve used to purchase common stock for treasury was $1.3 billion in
our primary objective, maximizing share-owner value over time. 1997 versus $1.5 billion in 1996.
We use free cash flow, along with borrowings, to pay dividends Commercial paper is our primary source of short-term financ-
and make share repurchases. ing. On December 31, 1997, we had $2.6 billion outstanding in
commercial paper borrowings. In addition, we had $.9 billion in
lines of credit and other short-term credit facilities available,
$.1 billion of which was outstanding. The 1997 reduction in

39
Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

loans and notes payable was funded by proceeds received from a value per share greater than the carrying value per share of
the sale of certain bottling interests, as discussed previously. our interest in Coca-Cola Amatil. Our equity method invest-
ments also increased in 1997 due to our change from the cost
Exchange — Our international operations are subject to certain method to the equity method in accounting for Panamco and
opportunities and risks, including currency fluctuations and Grupo Continental, S.A., and due to increased investments in
government actions. We closely monitor our operations in each other bottling operations. Our cost method investments
country so we can quickly and decisively respond to changing declined due to the change in accounting for Panamco
economic and political environments and to fluctuations in and Grupo Continental, S.A., partially offset by additional
foreign currencies and interest rates. investments in Embotelladoras Polar S.A. and Embotelladora
We use approximately 50 functional currencies. Due to Andina S.A. Unrealized gain on available-for-sale securities, a
our global operations, weaknesses in some of these currencies component of share-owners’ equity, is comprised of adjust-
are often offset by strengths in others. In 1997, 1996 and ments to report our marketable cost method investments at
1995, the weighted-average exchange rates for a basket of fair value. During 1997, unrealized gain on securities
selected foreign currencies, and certain individual currencies, decreased $98 million due primarily to the change in
strengthened (weakened) against the U.S. dollar as follows: accounting for Panamco and Grupo Continental, S.A.
The 1996 decrease in our accounts receivable, inventories,
Year Ended December 31, 1997 1996 1995
property, plant and equipment, goodwill, and accounts payable
Basket of currencies (10)% (8)% Even
and accrued expenses was primarily due to the disposition of
Australian dollar (7)% 6% 1%
our previously consolidated bottling and canning operations in
British pound 4% Even 3%
France and Belgium and the deconsolidation of our previously
Canadian dollar (1)% Even Even
consolidated east German bottler. In 1996, our equity method
French franc (12)% (4)% 13 %
investments increased primarily due to our investments in
German mark (13)% (6)% 13 %
CCEAG and Coca-Cola y Hit. The 1996 increase in cost method
Japanese yen (10)% (15)% 9%
investments included our investment in Embotelladoras Polar
S.A., Embotelladora Andina S.A., Panamco and noncash adjust-
These percentages do not include the effects of our hedging ments that increased our investments to fair value. The decrease
activities and, therefore, do not reflect the actual impact of in accrued income taxes was directly attributable to our 1996
fluctuations in exchange on our operating results. Our foreign settlement with the IRS, whereby $320 million of previously
currency management program mitigates over time a portion accrued income tax liabilities was reversed as a reduction of
of our exchange risks. income tax expense.
The change in our foreign currency translation adjustment
in 1997 and 1996 was primarily due to the revaluation Impact of Inflation and Changing Prices
of net assets located in countries where the local currency Inflation is a factor that affects the way we operate in many
significantly weakened against the U.S. dollar. Exchange gains markets around the world. In general, we are able to increase
(losses)-net amounted to $(56) million in 1997, $3 million prices to counteract the effects of increasing costs and to generate
in 1996 and $(21) million in 1995, and were recorded in sufficient cash flows to maintain our productive capability.
other income-net. Exchange gains (losses)-net includes
the remeasurement of certain currencies into functional Year 2000
currencies and the costs of hedging certain of our balance In prior years, certain computer programs were written using
sheet exposures. two digits rather than four to define the applicable year. These
Additional information concerning our hedging activities is programs were written without considering the impact of the
presented on pages 53 through 55. upcoming change in the century and may experience prob-
lems handling dates beyond the year 1999. This could cause
Financial Position computer applications to fail or to create erroneous results
The carrying value of our investment in Coca-Cola Enterprises unless corrective measures are taken. Incomplete or untimely
decreased in 1997 as a result of deferred gains related to the resolution of the Year 2000 issue could have a material adverse
sales of our interests in Coca-Cola & Schweppes Beverages impact on our Company’s business, operations or financial
Ltd., Coca-Cola Beverages Ltd. of Canada and The Coca-Cola condition in the future.
Bottling Company of New York, Inc. to Coca-Cola Enterprises. Our Company has been assessing the impact that the Year 2000
The deferred gains result from our approximate 44 percent issue will have on our computer systems since 1995. In response
ownership in Coca-Cola Enterprises. The carrying value of our to these assessments, which are ongoing, our Company has
investment in Coca-Cola Amatil increased in 1997 due to developed a plan to inventory critical systems and develop
Coca-Cola Amatil issuing shares to San Miguel Corporation at solutions to those systems that are found to have date-related

40
Financial Review Incorporating Management’s Discussion and Analysis T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

deficiencies. Project plans call for the completion of the solution and environmental laws in domestic or foreign jurisdictions.
implementation phase and testing of those solutions prior to • Fluctuations in the cost and availability of raw materials
any anticipated impact on our systems. Our Company is also and the ability to maintain favorable supplier arrangements
surveying critical suppliers and customers to determine the and relationships.
status of their Year 2000 compliance programs. • The ability to achieve earnings forecasts, which are generated
Based on our work to date, and assuming that our project based on projected volumes and sales of many product types,
plans, which continue to evolve, can be implemented as planned, some of which are more profitable than others. There can be
we believe future costs relating to the Year 2000 issue will not no assurance that we will achieve the projected level or mix of
have a material impact on our Company’s consolidated financial product sales.
position, results of operations or cash flows. • Interest rate fluctuations and other capital market conditions,
including foreign currency rate fluctuations. Most of our
Outlook exposures to capital markets, including interest and foreign
While we cannot predict future performance, we believe consid- currency, are managed on a consolidated basis, which allows
erable opportunities exist for sustained, profitable growth, not us to net certain exposures and, thus, take advantage of any
only in the developing population centers of the world but also natural [Link] use derivative financial instruments to reduce
in our most established markets, including the United States. our net exposure to financial risks. There can be no assurance,
We firmly believe the strength of our brands, our unparalleled however, that our financial risk management program will be
distribution system, our global presence, our strong financial successful in reducing foreign currency exposures.
condition and the skills of our people give us the flexibility • Economic and political conditions in international markets,
to capitalize on these growth opportunities as we continue to including civil unrest, governmental changes and restrictions
pursue our goal of increasing share-owner value. on the ability to transfer capital across borders.
• The ability to penetrate developing and emerging markets,
Forward-Looking Statements which also depends on economic and political conditions, and
The Private Securities Litigation Reform Act of 1995 (the Act) how well we are able to acquire or form strategic business
provides a safe harbor for forward-looking statements made by or alliances with local bottlers and make necessary infrastructure
on behalf of our Company. Our Company and its representatives enhancements to production facilities, distribution networks,
may from time to time make written or verbal forward-looking sales equipment and technology. Moreover, the supply of
statements, including statements contained in our Company’s products in developing markets must match the customers’
filings with the Securities and Exchange Commission and in our demand for those products, and due to product price and
reports to share owners. All statements which address operating cultural differences, there can be no assurance of product
performance, events or developments that we expect or anticipate acceptance in any particular market.
will occur in the future, including statements relating to volume • The effectiveness of our advertising, marketing and promo-
growth, share of sales and earnings per share growth or state- tional programs.
ments expressing general optimism about future operating • The uncertainties of litigation, as well as other risks and
results, are forward-looking statements within the meaning of the uncertainties detailed from time to time in our Company’s
Act. The forward-looking statements are and will be based on Securities and Exchange Commission filings.
management’s then current views and assumptions regarding • Adverse weather conditions, which could reduce demand for
future events and operating performance. Company products.
The following are some of the factors that could cause actual • Our Company’s ability and our customers’ and suppliers’
results to differ materially from estimates contained in our ability to replace, modify or upgrade computer programs in
Company’s forward-looking statements: ways that adequately address the Year 2000 issue.
• The ability to generate sufficient cash flows to support capital
expansion plans, share repurchase programs and general The foregoing list of important factors is not exclusive.
operating activities.
• Competitive product and pricing pressures and the ability to Additional Information
gain or maintain share of sales in the global market as a result For additional information about our operations, cash flows,
of actions by competitors. While we believe our opportunities liquidity and capital resources, please refer to the information
for sustained, profitable growth are considerable, unanticipated on pages 44 through 62 of this report. Additional information
actions of competitors could impact our earnings, share of sales concerning our operations in specific geographic areas is
and volume growth. presented on page 60.
• Changes in laws and regulations, including changes in
accounting standards, taxation requirements (including tax
rate changes, new tax laws and revised tax law interpretations)

41
 Selected Financial Data T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Compound Growth Rates Year Ended December 31,

(In millions except per share data, ratios and growth rates) 5 Years 10 Years 1997 1996

Summary of Operations
Net operating revenues 7.5% 9.4% $ 18,868 $ 18,673
Cost of goods sold 3.5% 5.2% 6,015 6,738
Gross profit 9.8% 12.3% 12,853 11,935
Selling, administrative and general expenses 8.1% 11.3% 7,852 8,020
Operating income 12.7% 14.0% 5,001 3,915
Interest income 211 238
Interest expense 258 286
Equity income 155 211
Other income (deductions)–net 583 87
Gains on issuances of stock by equity investees 363 431
Income from continuing operations before income taxes
and changes in accounting principles 17.1% 16.1% 6,055 4,596
Income taxes 17.4% 14.5% 1,926 1,104
Income from continuing operations before changes
in accounting principles 17.0% 16.9% $ 4,129 $ 3,492
Net income 19.9% 16.3% $ 4,129 $ 3,492
Preferred stock dividends — —
Net income available to common share owners 19.9% 16.3% $ 4,129 $ 3,492
Average common shares outstanding 2,477 2,494
Average common shares outstanding assuming dilution 2,515 2,523

Per Common Share Data

Income from continuing operations before changes
in accounting principles — basic 18.3% 19.1% $ 1.67 $ 1.40
Income from continuing operations before changes
in accounting principles — diluted 18.2% 18.9% 1.64 1.38
Basic net income 21.5% 18.7% 1.67 1.40
Diluted net income 21.5% 18.5% 1.64 1.38
Cash dividends 14.9% 14.9% .56 .50
Market price on December 31 26.1% 30.2% 66.69 52.63
Total Market Value of Common Stock1 24.7% 27.8% $ 164,766 $ 130,575

Balance Sheet Data

Cash, cash equivalents and current marketable securities $ 1,843 $ 1,658
Property, plant and equipment–net 3,743 3,550
Depreciation 384 442
Capital expenditures 1,093 990
Total assets 16,940 16,161
Long–term debt 801 1,116
Total debt 3,875 4,513
Share–owners’ equity 7,311 6,156
Total capital1 11,186 10,669

Other Key Financial Measures1

Total debt–to–total capital 34.6% 42.3%
Net debt–to–net capital 21.9% 31.4%
Return on common equity 61.3% 60.5%
Return on capital 39.4% 36.7%
Dividend payout ratio 33.6% 35.7%
Free cash flow $ 3,533 $ 2,413
Economic profit $ 3,325 $ 2,718
1
See Glossary on page 67.
2
In 1994, we adopted SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”
3
In 1993, we adopted SFAS No. 112, “Employers’ Accounting for Postemployment Benefits.”
4
In 1992, we adopted SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.”

42
 T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

1995 1994 2 1993 3 1992 4,5 1991 5 1990 5 1989 5 1988 1987

$ 18,127 $ 16,264 $ 14,030 $ 13,119 $ 11,599 $ 10,261 $ 8,637 $ 8,076 $ 7,667

6,940 6,168 5,160 5,055 4,649 4,208 3,548 3,429 3,633
11,187 10,096 8,870 8,064 6,950 6,053 5,089 4,647 4,034
7,161 6,459 5,771 5,317 4,641 4,103 3,342 3,044 2,682
4,026 3,637 3,099 2,747 2,309 1,950 1,747 1,603 1,352
245 181 144 164 175 170 205 199 232
272 199 168 171 192 231 308 230 297
169 134 91 65 40 110 75 92 64
86 (25) 7 (59) 51 15 45 (38) (28)
74 — 12 — — — — — 40

4,328 3,728 3,185 2,746 2,383 2,014 1,764 1,626 1,363

1,342 1,174 997 863 765 632 553 537 496

$ 2,986 $ 2,554 $ 2,188 $ 1,883 $ 1,618 $ 1,382 $ 1,211 $ 1,089 $ 867

$ 2,986 $ 2,554 $ 2,176 $ 1,664 $ 1,618 $ 1,382 $ 1,537 $ 1,045 $ 916
— — — — 1 18 21 7 —
$ 2,986 $ 2,554 $ 2,176 $ 1,664 $ 1,617 $ 1,364 $ 1,5166 $ 1,038 $ 916
2,525 2,580 2,603 2,634 2,666 2,674 2,768 2,917 3,019
2,549 2,599 2,626 2,668 2,695 2,706 2,789 2,929 3,037

$ 1.18 $ .99 $ .84 $ .72 $ .61 $ .51 $ .43 $ .37 $ .29

1.17 .98 .83 .71 .60 .50 .43 .37 .29

1.18 .99 .84 .63 .61 .51 .556 .36 .30
1.17 .98 .83 .62 .60 .50 .54 .35 .30
.44 .39 .34 .28 .24 .20 .17 .15 .14
37.13 25.75 22.31 20.94 20.06 11.63 9.66 5.58 4.77
$ 92,983 $ 65,711 $ 57,905 $ 54,728 $ 53,325 $ 31,073 $ 26,034 $ 15,834 $ 14,198

$ 1,315 $ 1,531 $ 1,078 $ 1,063 $ 1,117 $ 1,492 $ 1,182 $ 1,231 $ 1,489

4,336 4,080 3,729 3,526 2,890 2,386 2,021 1,759 1,602
421 382 333 310 254 236 181 167 152
937 878 800 1,083 792 593 462 387 304
15,041 13,873 12,021 11,052 10,189 9,245 8,249 7,451 8,606
1,141 1,426 1,428 1,120 985 536 549 761 909
4,064 3,509 3,100 3,207 2,288 2,537 1,980 2,124 2,995
5,392 5,235 4,584 3,888 4,239 3,662 3,299 3,345 3,187
9,456 8,744 7,684 7,095 6,527 6,199 5,279 5,469 6,182

43.0% 40.1% 40.3% 45.2% 35.1% 40.9% 37.5% 38.8% 48.4%

32.2% 25.5% 29.0% 33.1% 24.1% 24.6% 15.6% 21.1% 21.1%
56.2% 52.0% 51.7% 46.4% 41.3% 41.4% 39.4% 34.7% 26.0%
34.9% 32.7% 31.2% 29.4% 27.5% 26.8% 26.5% 21.3% 18.3%
37.2% 39.4% 40.6% 44.3% 39.5% 39.2% 31.0%6 42.1% 46.0%
$ 2,102 $ 2,146 $ 1,623 $ 873 $ 960 $ 844 $ 1,664 $ 1,517 $ 1,023
$ 2,291 $ 1,896 $ 1,549 $ 1,300 $ 1,073 $ 920 $ 859 $ 717 $ 530
5
In 1992, we adopted SFAS No. 109, “Accounting for Income Taxes,” by restating financial statements beginning in 1989.
6
Net income available to common share owners in 1989 included after-tax gains of $604 million ($.22 per common share, basic and diluted) from the
sales of our equity interest in Columbia Pictures Entertainment, Inc. and our bottled water business, and the transition effect of $265 million related to the
change in accounting for income taxes. Excluding these nonrecurring items, our dividend payout ratio in 1989 was 39.9 percent.

43
 Consolidated Balance Sheets T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

December 31, 1997 1996

(In millions except share data)

Assets

Current
Cash and cash equivalents $ 1,737 $ 1,433
Marketable securities 106 225
1,843 1,658
Trade accounts receivable, less allowances of $23 in 1997 and $30 in 1996 1,639 1,641
Inventories 959 952
Prepaid expenses and other assets 1,528 1,659
Total Current Assets 5,969 5,910

Investments and Other Assets

Equity method investments
Coca–Cola Enterprises Inc. 184 547
Coca–Cola Amatil Limited 1,204 881
Other, principally bottling companies 3,049 2,004
Cost method investments, principally bottling companies 457 737
Marketable securities and other assets 1,607 1,779
6,501 5,948

Property, Plant and Equipment

Land 183 204
Buildings and improvements 1,535 1,528
Machinery and equipment 3,896 3,649
Containers 157 200
5,771 5,581
Less allowances for depreciation 2,028 2,031
3,743 3,550

Goodwill and Other Intangible Assets 727 753

$ 16,940 $ 16,161

44
 T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

December 31, 1997 1996

Liabilities and Share-Owners’ Equity

Current
Accounts payable and accrued expenses $ 3,249 $ 2,972
Loans and notes payable 2,677 3,388
Current maturities of long–term debt 397 9
Accrued income taxes 1,056 1,037
Total Current Liabilities 7,379 7,406

Long-Term Debt 801 1,116

Other Liabilities 1,001 1,182

Deferred Income Taxes 448 301

Share-Owners’ Equity
Common stock, $.25 par value
Authorized: 5,600,000,000 shares
Issued: 3,443,441,902 shares in 1997; 3,432,956,518 shares in 1996 861 858
Capital surplus 1,527 1,058
Reinvested earnings 17,869 15,127
Unearned compensation related to outstanding restricted stock (50) (61)
Foreign currency translation adjustment (1,372) (662)
Unrealized gain on securities available for sale 58 156
18,893 16,476

Less treasury stock, at cost (972,812,731 shares in 1997;

951,963,574 shares in 1996) 11,582 10,320
7,311 6,156
$ 16,940 $ 16,161

See Notes to Consolidated Financial Statements.

45
 Consolidated Statements of Income T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Year Ended December 31, 1997 1996 1995

(In millions except per share data)

Net Operating Revenues $ 18,868 $ 18,673 $ 18,127

Cost of goods sold 6,015 6,738 6,940
Gross Profit 12,853 11,935 11,187
Selling, administrative and general expenses 7,852 8,020 7,161
Operating Income 5,001 3,915 4,026
Interest income 211 238 245
Interest expense 258 286 272
Equity income 155 211 169
Other income–net 583 87 86
Gains on issuances of stock by equity investees 363 431 74
Income before Income Taxes 6,055 4,596 4,328
Income taxes 1,926 1,104 1,342
Net Income $ 4,129 $ 3,492 $ 2,986

Basic Net Income per Share $ 1.67 $ 1.40 $ 1.18

Diluted Net Income per Share $ 1.64 $ 1.38 $ 1.17

Average Shares Outstanding 2,477 2,494 2,525

Dilutive effect of stock options 38 29 24
Average Shares Outstanding Assuming Dilution 2,515 2,523 2,549

See Notes to Consolidated Financial Statements.

46
 Consolidated Statements of Cash Flows T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Year Ended December 31, 1997 1996 1995

(In millions)

Operating Activities
Net income $ 4,129 $ 3,492 $ 2,986
Depreciation and amortization 626 633 562
Deferred income taxes 380 (145) 157
Equity income, net of dividends (108) (89) (25)
Foreign currency adjustments 37 (60) (23)
Gains on issuances of stock by equity investees (363) (431) (74)
Gains on sales of assets, including bottling interests (639) (135) (16)
Other items 18 316 60
Net change in operating assets and liabilities (47) (118) (299)
Net cash provided by operating activities 4,033 3,463 3,328

Investing Activities
Acquisitions and investments, principally bottling companies (1,100) (645) (338)
Purchases of investments and other assets (459) (623) (403)
Proceeds from disposals of investments and other assets 1,999 1,302 580
Purchases of property, plant and equipment (1,093) (990) (937)
Proceeds from disposals of property, plant and equipment 71 81 44
Other investing activities 82 (175) (172)
Net cash used in investing activities (500) (1,050) (1,226)

Net cash provided by operations after reinvestment 3,533 2,413 2,102

Financing Activities
Issuances of debt 155 1,122 754
Payments of debt (751) (580) (212)
Issuances of stock 150 124 86
Purchases of stock for treasury (1,262) (1,521) (1,796)
Dividends (1,387) (1,247) (1,110)
Net cash used in financing activities (3,095) (2,102) (2,278)

Effect of Exchange Rate Changes on Cash and Cash Equivalents (134) (45) (43)

Cash and Cash Equivalents

Net increase (decrease) during the year 304 266 (219)
Balance at beginning of year 1,433 1,167 1,386
Balance at end of year $ 1,737 $ 1,433 $ 1,167

See Notes to Consolidated Financial Statements.

47
 Consolidated Statements of Share-Owners’ Equity T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Number of
Common Outstanding Foreign Unrealized
Three Years Ended Shares Common Capital Reinvested Restricted Currency Gain on Treasury
December 31, 1997 Outstanding Stock Surplus Earnings Stock Translation Securities Stock
(In millions except per share data)

Balance December 31, 1994 2,552 $ 854 $ 746 $ 11,006 $ (74) $ (272) $ 48 $ (7,073)
Stock issued to employees
exercising stock options 8 2 84 — — — — —
Tax benefit from employees’ stock
option and restricted stock plans — — 26 — — — — —
Stock issued under restricted stock
plans, less amortization of $12 — — 7 — 6 — — —
Translation adjustments — — — — — (152) — —
Net change in unrealized gain on
securities, net of deferred taxes — — — — — — 34 —
Purchases of stock for treasury (58)1 — — — — — — (1,796)
Treasury stock issued in connection
with an acquisition 3 — — — — — — 70
Net income — — — 2,986 — — — —
Dividends (per share — $.44) — — — (1,110) — — — —
Balance December 31, 1995 2,505 856 863 12,882 (68) (424) 82 (8,799)
Stock issued to employees
exercising stock options 9 2 122 — — — — —
Tax benefit from employees’ stock
option and restricted stock plans — — 63 — — — — —
Stock issued under restricted stock
plans, less amortization of $15 — — 10 — 7 — — —
Translation adjustments — — — — — (238) — —
Net change in unrealized gain on
securities, net of deferred taxes — — — — — — 74 —
Purchases of stock for treasury (33)1 — — — — — — (1,521)
Net income — — — 3,492 — — — —
Dividends (per share — $.50) — — — (1,247) — — — —
Balance December 31, 1996 2,481 858 1,058 15,127 (61) (662) 156 (10,320)
Stock issued to employees
exercising stock options 10 3 147 — — — — —
Tax benefit from employees’ stock
option and restricted stock plans — — 312 — — — — —
Stock issued under restricted stock
plans, less amortization of $10 — — 10 — 11 — — —
Translation adjustments — — — — — (710) — —
Net change in unrealized gain on
securities, net of deferred taxes — — — — — — (98) —
Purchases of stock for treasury (20)1 — — — — — — (1,262)
Net income — — — 4,129 — — — —
Dividends (per share — $.56) — — — (1,387) — — — —
Balance December 31, 1997 2,471 $ 861 $ 1,527 $ 17,869 $ (50) $ (1,372) $ 58 $ (11,582)
1
Common stock purchased from employees exercising stock options numbered 1.1 million, .9 million and .6 million shares for the years ending
December 31, 1997, 1996 and 1995, respectively.
See Notes to Consolidated Financial Statements.

48
 Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Note 1: Organization and Summary of Significant Cash Equivalents — Marketable securities that are highly
Accounting Policies liquid and have maturities of three months or less at the date
Organization — The Coca-Cola Company and subsidiaries of purchase are classified as cash equivalents.
(our Company) is predominantly a manufacturer, marketer and
distributor of soft-drink and noncarbonated beverage concen- Inventories — Inventories consist primarily of raw materials
trates and syrups. Operating in nearly 200 countries worldwide, and supplies and are valued at the lower of cost or market.
we primarily sell our concentrates and syrups to bottling and In general, cost is determined on the basis of average cost or
canning operations, fountain wholesalers and fountain retailers. first-in, first-out methods.
We have significant markets for our products in all of the
world’s geographic regions. We record revenue when title passes Property, Plant and Equipment — Property, plant and equip-
to our customers. ment are stated at cost and are depreciated principally by the
straight-line method over the estimated useful lives of the assets.
Basis of Presentation — Certain amounts in the prior years’
financial statements have been reclassified to conform to the Goodwill and Other Intangible Assets — Goodwill and other
current year presentation. intangible assets are stated on the basis of cost and are amortized,
principally on a straight-line basis, over the estimated future
Consolidation — Our consolidated financial statements include periods to be benefited (not exceeding 40 years). Goodwill and
the accounts of The Coca-Cola Company and all subsidiaries other intangible assets are periodically reviewed for impairment
except where control is temporary or does not rest with our based on an assessment of future operations to ensure they are
Company. Our investments in companies in which we have appropriately valued. Accumulated amortization was approxi-
the ability to exercise significant influence over operating and mately $105 million and $86 million on December 31, 1997
financial policies, including certain investments where there is and 1996, respectively.
a temporary majority interest, are accounted for by the equity
method. Accordingly, our Company’s share of the net earnings Use of Estimates — In conformity with generally accepted
of these companies is included in consolidated net income. accounting principles, the preparation of our financial
Our investments in other companies are carried at cost or fair statements requires our management to make estimates and
value, as appropriate. All significant intercompany accounts and assumptions that affect the amounts reported in our financial
transactions are eliminated upon consolidation. statements and accompanying notes. Although these estimates
are based on our knowledge of current events and actions we
Issuances of Stock by Equity Investees — When one of may undertake in the future, actual results may ultimately
our equity investees issues additional shares to third parties, differ from estimates.
our percentage ownership interest in the investee decreases. In
the event the issuance price per share is more or less than our New Accounting Standards — In 1997, the Financial Accounting
average carrying amount per share, we recognize a noncash gain Standards Board issued Statement of Financial Accounting
or loss on the issuance. This noncash gain or loss, net of any Standards (SFAS) No. 130, “Reporting Comprehensive Income,”
deferred taxes, is recognized in our net income in the period the and SFAS No. 131, “Disclosures about Segments of an Enterprise
change of ownership interest occurs. and Related Information.” These statements, which are effective
for fiscal years beginning after December 15, 1997, expand or
Advertising Costs — Our Company expenses production costs of modify disclosures and will have no impact on our consolidated
print, radio and television advertisements as of the first date the financial position, results of operations or cash flows.
advertisements take place. Advertising expenses included in sell- We adopted SFAS No. 128, “Earnings per Share,” in 1997.
ing, administrative and general expenses were $1,576 million in In accordance with SFAS No. 128, we have presented both basic
1997, $1,441 million in 1996 and $1,292 million in 1995. As net income per share and diluted net income per share in our
of December 31, 1997 and 1996, advertising costs of approx- financial statements.
imately $358 million and $247 million, respectively, were
recorded primarily in prepaid expenses and other assets in our
accompanying balance sheets.

Net Income per Share — Basic net income per share is com-
puted by dividing net income by the weighted-average number
of shares outstanding. Diluted net income per share includes the
dilutive effect of stock options.

49
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Note 2: Bottling Investments we committed approximately $190 million and $120 million,
Coca-Cola Enterprises Inc. — Coca-Cola Enterprises is the respectively, to Coca-Cola Enterprises under a Company
largest soft-drink bottler in the world. Our Company owns program that encourages bottlers to invest in building and
approximately 44 percent of the outstanding common stock of supporting beverage infrastructure.
Coca-Cola Enterprises, and accordingly, we account for our If valued at the December 31, 1997, quoted closing price of
investment by the equity method of accounting. The excess of publicly traded Coca-Cola Enterprises shares, the calculated
our equity in the underlying net assets of Coca-Cola Enterprises value of our investment in Coca-Cola Enterprises would have
over our investment is primarily being amortized on a straight- exceeded its carrying value by approximately $5.8 billion.
line basis over 40 years. The balance of this excess, net of
amortization, was approximately $595 million at December 31, Coca-Cola Amatil Limited — We own approximately 33 percent
1997. A summary of financial information for Coca-Cola of Coca-Cola Amatil, an Australian-based bottler of our products
Enterprises is as follows (in millions): that operates in 18 countries. Accordingly, we account for our
investment in Coca-Cola Amatil by the equity method. The
December 31, 1997 1996
excess of our investment over our equity in the underlying net
Current assets $ 1,813 $ 1,319
assets of Coca-Cola Amatil is being amortized on a straight-line
Noncurrent assets 15,674 9,915
basis over 40 years. The balance of this excess, net of amortiza-
Total assets $ 17,487 $ 11,234
tion, was approximately $64 million at December 31, 1997.
Current liabilities $ 3,032 $ 1,690
A summary of financial information for Coca-Cola Amatil is as
Noncurrent liabilities 12,673 7,994
follows (in millions):
Total liabilities $ 15,705 $ 9,684
Share–owners’ equity $ 1,782 $ 1,550 December 31, 1997 1996
Company equity investment $ 184 $ 547 Current assets $ 1,470 $ 1,847
Noncurrent assets 4,590 2,913
Total assets $ 6,060 $ 4,760
Year Ended December 31, 1997 1996 1995
Current liabilities $ 1,053 $ 1,247
Net operating revenues $ 11,278 $ 7,921 $ 6,773
Noncurrent liabilities 1,552 1,445
Cost of goods sold 7,096 4,896 4,267
Total liabilities $ 2,605 $ 2,692
Gross profit $ 4,182 $ 3,025 $ 2,506
Share–owners’ equity $ 3,455 $ 2,068
Operating income $ 720 $ 545 $ 468
Company equity investment $ 1,204 $ 881
Cash operating profit1 $ 1,666 $ 1,172 $ 997
Net income $ 171 $ 114 $ 82
Net income available Year Ended December 31, 1997 1996 1995
to common share owners $ 169 $ 106 $ 80 Net operating revenues $ 3,290 $ 2,905 $ 2,193
Company equity income $ 59 $ 53 $ 35 Cost of goods sold 1,856 1,737 1,311
1 Gross profit $ 1,434 $ 1,168 $ 882
Cash operating profit is defined as operating income plus depreciation
expense, amortization expense and other noncash operating expenses. Operating income $ 276 $ 215 $ 214
Cash operating profit1 $ 505 $ 384 $ 329
Our net concentrate/syrup sales to Coca-Cola Enterprises Net income $ 89 $ 80 $ 75
were $2.5 billion in 1997, $1.6 billion in 1996 and $1.3 billion Company equity income $ 27 $ 27 $ 28
in 1995, comprising approximately 13 percent, 9 percent and 1
Cash operating profit is defined as operating income plus depreciation
7 percent of our 1997, 1996 and 1995 net operating revenues. expense, amortization expense and other noncash operating expenses.
Coca-Cola Enterprises purchases sweeteners through our
Company; however, related collections from Coca-Cola Our net concentrate sales to Coca-Cola Amatil were approxi-
Enterprises and payments to suppliers are not included in mately $588 million in 1997, $450 million in 1996 and
our consolidated statements of income. These transactions $340 million in 1995. We also participate in various marketing,
amounted to $223 million in 1997, $247 million in 1996 and promotional and other activities with Coca-Cola Amatil.
$242 million in 1995. We also provide certain administrative If valued at the December 31, 1997, quoted closing price
and other services to Coca-Cola Enterprises under negotiated of publicly traded Coca-Cola Amatil shares, the calculated value
fee arrangements. of our investment in Coca-Cola Amatil would have exceeded its
Our direct support for certain marketing activities of carrying value by approximately $918 million.
Coca-Cola Enterprises and participation with them in coopera-
tive advertising and other marketing programs amounted to
approximately $604 million in 1997, $448 million in 1996
and $343 million in 1995. Additionally, in 1997 and 1996,

50
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Other Equity Investments — Operating results include our 1997, we sold our interest in Coca-Cola y Hit to Panamerican
proportionate share of income from our equity investments Beverages, Inc. (Panamco) in exchange for shares in Panamco.
since the respective dates of those investments. A summary (See Note 3.)
of financial information for our equity investments in the If valued at the December 31, 1997, quoted closing prices of
aggregate, other than Coca-Cola Enterprises and Coca-Cola shares actively traded on stock markets, the calculated value
Amatil, is as follows (in millions): of our equity investments in publicly traded bottlers other than
Coca-Cola Enterprises and Coca-Cola Amatil would have
December 31, 1997 1996
exceeded our carrying value by approximately $1.2 billion.
Current assets $ 2,946 $ 2,792
Noncurrent assets 11,371 8,783
Note 3: Issuances of Stock by Equity Investees
Total assets $ 14,317 $ 11,575
In the second quarter of 1997, our Company and San
Current liabilities $ 3,545 $ 2,758
Miguel Corporation (San Miguel) sold our respective interests
Noncurrent liabilities 4,636 4,849
in Coca-Cola Bottlers Philippines, Inc. to Coca-Cola Amatil in
Total liabilities $ 8,181 $ 7,607
exchange for approximately 293 million shares of Coca-Cola
Share–owners’ equity $ 6,136 $ 3,968
Amatil stock. In connection with this transaction, Coca-Cola
Company equity investment $ 3,049 $ 2,004
Amatil issued approximately 210 million shares to San Miguel
valued at approximately $2.4 billion. The issuance to San
Year Ended December 31, 1997 1996 1995 Miguel resulted in a one-time noncash pretax gain for our
Net operating revenues $ 13,688 $ 11,640 $ 9,370 Company of approximately $343 million. We provided
Cost of goods sold 8,645 8,028 6,335 deferred taxes of approximately $141.5 million on this gain.
Gross profit $ 5,043 $ 3,612 $ 3,035 This transaction resulted in our Company’s 36 percent interest
Operating income $ 869 $ 835 $ 632 in Coca-Cola Amatil being diluted to 33 percent.
Cash operating profit1 $ 1,794 $ 1,268 $ 1,079 Also in the second quarter of 1997, our Company and
Net income $ 405 $ 366 $ 280 the Cisneros Group sold our respective interests in Coca-Cola y
Company equity income $ 69 $ 131 $ 106 Hit to Panamco in exchange for approximately 30.6 million
shares of Panamco stock. In connection with this transaction,
Equity investments include certain non-bottling investees.
1
Cash operating profit is defined as operating income plus depreciation Panamco issued approximately 13.6 million shares to the
expense, amortization expense and other noncash operating expenses. Cisneros Group valued at approximately $402 million. The
issuance to the Cisneros Group resulted in a one-time noncash
Net sales to equity investees other than Coca-Cola Enterprises pretax gain for our Company of approximately $20 million. We
and Coca-Cola Amatil were $1.5 billion in 1997, $1.5 billion in provided deferred taxes of approximately $7.2 million on this
1996 and $1.2 billion in 1995. Our Company also participates gain. At the completion of this transaction, our ownership in
in various marketing, promotional and other activities with Panamco was approximately 23 percent.
these investees, the majority of which are located outside the In the third quarter of 1996, our previously wholly owned
United States. subsidiary, Coca-Cola Erfrischungsgetränke G.m.b.H. (CCEG),
In February 1997, we sold our 49 percent interest in issued approximately 24.4 million shares of common stock
Coca-Cola & Schweppes Beverages Ltd. to Coca-Cola as part of a merger with three independent German bottlers
Enterprises. This transaction resulted in proceeds for our of our products. The shares were valued at approximately
Company of approximately $1 billion and an after-tax gain of $925 million, based upon the fair values of the assets of the
approximately $.08 per share (basic and diluted). In August three acquired bottling companies. In connection with CCEG’s
1997, we sold our 48 percent interest in Coca-Cola Beverages issuance of shares, a new corporation was established,
Ltd. of Canada and our 49 percent ownership interest in The Coca-Cola Erfrischungsgetränke AG (CCEAG), and our owner-
Coca-Cola Bottling Company of New York, Inc. to Coca-Cola ship was reduced to 45 percent of the resulting corporation. As
Enterprises in exchange for aggregate consideration valued at a result, we began accounting for our related investment by the
approximately $456 million. This sale resulted in an after-tax equity method of accounting prospectively from the transac-
gain of approximately $.04 per share (basic and diluted). tion date. This transaction resulted in a noncash pretax gain
In July 1996, we sold our interests in our French and of $283 million for our Company. We provided deferred taxes
Belgian bottling and canning operations to Coca-Cola of approximately $171 million related to this gain.
Enterprises in return for cash consideration of approximately Also in the third quarter of 1996, Coca-Cola Amatil issued
$936 million. Also in 1996, we contributed cash and our approximately 46 million shares in exchange for approximately
Venezuelan bottling interests to a new joint venture, $522 million. This issuance reduced our Company’s ownership
Embotelladora Coca-Cola y Hit de Venezuela, S.A. (Coca-Cola percentage in Coca-Cola Amatil from approximately 39 percent to
y Hit), in exchange for a 50 percent ownership interest. In approximately 36 percent. This transaction resulted in a noncash

51
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

pretax gain of $130 million for our Company. We have provided Note 6: Long-Term Debt
deferred taxes of approximately $47 million on this gain. Long-term debt consists of the following (in millions):
In 1996, Coca-Cola FEMSA de Buenos Aires, S.A. (CCFBA)
December 31, 1997 1996
issued approximately 19 million shares to Coca-Cola FEMSA,
53/4% German mark notes due 19981 $ 141 $ 161
S.A. de C.V. This issuance reduced our ownership in CCFBA
77/8% U.S. dollar notes due 1998 250 250
from 49 percent to approximately 32 percent. We recognized a
6% U.S. dollar notes due 2000 251 251
noncash pretax gain of approximately $18 million as a result of
65/8% U.S. dollar notes due 2002 150 150
this transaction. In subsequent transactions, we disposed of our
6% U.S. dollar notes due 2003 150 150
remaining interest in CCFBA.
73/8% U.S. dollar notes due 2093 116 116
In the third quarter of 1995, Coca-Cola Amatil completed a
Other, due 1998 to 2013 140 47
public offering in Australia of approximately 97 million shares
1,198 1,125
of common stock. In connection with the offering, our owner-
Less current portion 397 9
ship interest in Coca-Cola Amatil was diluted to approximately
$ 801 $ 1,116
40 percent. This transaction resulted in a noncash pretax gain
of $74 million. We provided deferred taxes of approximately 1
Portions of these notes have been swapped for liabilities denominated in
$27 million on this gain. other currencies.

Note 4: Accounts Payable and Accrued Expenses After giving effect to interest rate management instruments
Accounts payable and accrued expenses consist of the following (see Note 8), the principal amount of our long-term debt
(in millions): that had fixed and variable interest rates, respectively, was
$480 million and $718 million on December 31, 1997, and
December 31, 1997 1996
$261 million and $864 million on December 31, 1996. The
Accrued marketing $ 615 $ 510
weighted-average interest rate on our Company’s long-term
Container deposits 30 64
debt was 6.2 and 5.9 percent on December 31, 1997
Accrued compensation 152 169
and 1996, respectively. Interest paid was approximately
Sales, payroll and other taxes 173 174
$264 million, $315 million and $275 million in 1997, 1996
Accounts payable and
and 1995, respectively.
other accrued expenses 2,279 2,055
Maturities of long-term debt for the five years succeeding
$ 3,249 $ 2,972
December 31, 1997, are as follows (in millions):
1998 1999 2000 2001 2002
$ 397 $ 13 $ 309 $ 61 $ 151
Note 5: Short-Term Borrowings and Credit
Arrangements
Loans and notes payable consist primarily of commercial paper The above notes include various restrictions, none of which is
issued in the United States. On December 31, 1997, we had presently significant to our Company.
$2.6 billion outstanding in commercial paper borrowings.
In addition, we had $.9 billion in lines of credit and other Note 7: Financial Instruments
short-term credit facilities available, under which $.1 billion Fair Value of Financial Instruments — The carrying amounts
was outstanding. Our weighted-average interest rates for reflected in our consolidated balance sheets for cash, cash equiv-
commercial paper were approximately 5.8 and 5.6 percent on alents, marketable equity securities, marketable cost method
December 31, 1997 and 1996, respectively. investments, receivables, loans and notes payable and long-term
These facilities are subject to normal banking terms and debt approximate their respective fair values. Fair values are
conditions. Some of the financial arrangements require com- based primarily on quoted prices for those or similar instru-
pensating balances, none of which are presently significant to ments. A comparison of the carrying value and fair value of our
our Company. hedging instruments is included in Note 8.

Certain Debt and Marketable Equity Securities — 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. On December 31,
1997 and 1996, we had no trading securities. Securities catego-
rized as available-for-sale are stated at fair value, with unrealized
gains and losses, net of deferred income taxes, reported in share-

52
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

owners’ equity. Debt securities categorized as held-to-maturity On December 31, 1997 and 1996, these investments were
are stated at amortized cost. included in the following captions on our consolidated balance
On December 31, 1997 and 1996, available-for-sale and held- sheets (in millions):
to-maturity securities consisted of the following (in millions):
Available–for–Sale Held–to–Maturity
Gross Gross Estimated December 31, Securities Securities
Unrealized Unrealized Fair 1997
December 31, Cost Gains Losses Value Cash and cash equivalents $ — $ 1,346
1997 Current marketable securities 64 42
Available–for–sale Cost method investments,
securities principally bottling companies 336 —
Equity securities $ 293 $ 93 $ (3) $ 383 Marketable securities and
Collateralized other assets 136 203
mortgage $ 536 $ 1,591
obligations 132 — (2) 130
Other debt 1996
securities 23 — — 23 Cash and cash equivalents $ — $ 1,208
$ 448 $ 93 $ (5) $ 536 Current marketable securities 68 157
Cost method investments,
Held–to–maturity principally bottling companies 584 —
securities Marketable securities and
Bank and other assets 145 243
corporate debt $ 1,569 $ — $ — $ 1,569 $ 797 $ 1,608
Other debt
securities 22 — — 22
$ 1,591 $ — $ — $ 1,591 The contractual maturities of these investments as of
December 31, 1997, were as follows (in millions):
Gross Gross Estimated Available–for–Sale Held–to–Maturity
Unrealized Unrealized Fair Securities Securities
December 31, Cost Gains Losses Value Fair Amor tized Fair
1996 Cost Value Cost Value

Available–for–sale 1998 $ 20 $ 20 $ 1,388 $ 1,388

securities 1999–2002 3 3 203 203
Equity securities $ 377 $ 259 $ (2) $ 634 Collateralized
Collateralized mortgage obligations 132 130 — —
mortgage Equity securities 293 383 — —
obligations 145 — (5) 140 $ 448 $ 536 $ 1,591 $ 1,591
Other debt
securities 24 — (1) 23 For the years ended December 31, 1997 and 1996, gross
$ 546 $ 259 $ (8) $ 797 realized gains and losses on sales of available-for-sale securities
were not material. The cost of securities sold is based on the
Held–to–maturity specific identification method.
securities
Bank and Note 8: Hedging Transactions and Derivative Financial
corporate debt $ 1,550 $ — $ (9) $ 1,541 Instruments
Other debt Our Company uses derivative financial instruments primarily to
securities 58 — — 58 reduce our exposure to adverse fluctuations in interest rates and
$ 1,608 $ — $ (9) $ 1,599 foreign exchange rates, and to a lesser extent, to reduce our
exposure to adverse fluctuations in commodity prices and other
market risks. When entered into, these financial instruments are
designated as hedges of underlying exposures. Because of the
high correlation between the hedging instrument and the under-
lying exposure being hedged, fluctuations in the value of the
instruments are generally offset by changes in the value of the

53
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

underlying exposures. Virtually all of our derivatives are anticipated sales. Premiums paid and realized gains and losses,
“over-the-counter” instruments. Our Company does not enter including those on terminated contracts, if any, are included in
into derivative financial instruments for trading purposes. prepaid expenses and other assets. These are recognized in
The estimated fair values of derivatives used to hedge or income along with unrealized gains and losses, in the same
modify our risks fluctuate over time. These fair value amounts period the hedged transactions are realized. Approximately
should not be viewed in isolation but rather in relation to the fair $52 million of realized gains and $17 million of realized
values of the underlying hedged transactions and investments losses on settled contracts entered into as hedges of firmly
and to the overall reduction in our exposure to adverse fluctua- committed transactions that have not yet occurred were
tions in interest rates, foreign exchange rates, commodity prices deferred on December 31, 1997 and 1996, respectively.
and other market risks. Deferred gains/losses from hedging anticipated transactions
The notional amounts of the derivative financial instruments were not material on December 31, 1997 or 1996. In the
do not necessarily represent amounts exchanged by the parties unlikely event that the underlying transaction terminates
and, therefore, are not a direct measure of our exposure or becomes improbable, the deferred gains or losses on the
through our use of derivatives. The amounts exchanged are associated derivative will be recorded in our income statement.
calculated by reference to the notional amounts and by other Gains and losses on derivative financial instruments that are
terms of the derivatives, such as interest rates, exchange rates designated and effective as hedges of net investments in inter-
or other financial indices. national operations are included in share-owners’ equity as a
We have established strict counterparty credit guidelines foreign currency translation adjustment.
and only enter into transactions with financial institutions of The following table presents the aggregate notional principal
investment grade or better. We monitor counterparty exposures amounts, carrying values, fair values and maturities of our
daily and any downgrade in credit rating receives immediate derivative financial instruments outstanding on December 31,
review. If a downgrade in the credit rating of a counterparty 1997 and 1996 (in millions):
were to occur, we have provisions requiring collateral in
Notional
the form of U.S. government securities for substantially all of Principal Carrying Fair
our transactions. To mitigate pre-settlement risk, minimum December 31, Amounts Values Values Maturity
credit standards become more stringent as the duration of the 1997
derivative financial instrument increases. To minimize the Interest rate
concentration of credit risk, we enter into derivative transac- management
tions with a portfolio of financial institutions. As a result, we
consider the risk of counterparty default to be minimal. Swap agreements
Assets $ 597 $ 4 $ 15 1998-2003
Interest Rate Management — Our Company maintains our Liabilities 175 (1) (12) 2000-2003
percentage of fixed and variable rate debt within defined
parameters. We enter into interest rate swap agreements that Foreign currency
maintain the fixed/variable mix within these parameters. These management
contracts had maturities ranging from one to six years on
December 31, 1997. Variable rates are predominantly linked to Forward contracts
LIBOR (London Interbank Offered Rate). Any differences paid Assets 1,286 27 93 1998-1999
or received on interest rate swap agreements are recognized as Liabilities 465 (6) 18 1998-1999
adjustments to interest expense over the life of each swap, Swap agreements
thereby adjusting the effective interest rate on the underlying Assets 178 1 3 1998
obligation. Liabilities 1,026 (4) (28) 1998-2002
Purchased options
Foreign Currency Management — The purpose of our foreign Assets 1,051 34 109 1998
currency hedging activities is to reduce the risk that our
eventual dollar net cash inflows resulting from sales outside Other
the United States will be adversely affected by changes in Assets 470 2 53 1998
exchange rates. Liabilities 68 (2) — 1998
We enter into forward exchange contracts and purchase cur- $ 5,316 $ 55 $ 251
rency options (principally European currencies and Japanese
yen) to hedge firm sale commitments denominated in foreign
currencies. We also purchase currency options (principally
European currencies and Japanese yen) to hedge certain

54
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Notional Note 10: Net Change in Operating Assets and

Principal Carrying Fair
December 31, Amounts Values Values Maturity Liabilities
1996 The changes in operating assets and liabilities, net of effects of
Interest rate acquisitions and divestitures of businesses and unrealized
management exchange gains/losses, are as follows (in millions):
1997 1996 1995
Swap agreements
Increase in trade accounts
Assets $ 893 $ 5 $ 13 1997–2003
receivable $ (164) $ (230) $ (255)
Liabilities 25 — 1 2002
Increase in inventories (43) (33) (80)
Interest rate caps
Increase in prepaid expenses
Assets 400 1 — 1997
and other assets (145) (219) (267)
Increase in accounts payable
Foreign currency
and accrued expenses 299 361 214
management
Increase (decrease) in
accrued taxes 393 (208) 26
Forward contracts
Increase (decrease) in
Assets 5 1 (2) 1997
other liabilities (387) 211 63
Liabilities 2,541 (53) (42) 1997–1998
$ (47) $ (118) $ (299)
Swap agreements
Assets 398 18 12 1997–1998
Liabilities 1,086 (12) (114) 1997–2002 Note 11: Restricted Stock, Stock Options and Other
Purchased options Stock Plans
Assets 1,873 42 89 1997 Our Company sponsors restricted stock award plans, stock
option plans, Incentive Unit Agreements and Performance Unit
Other Agreements. Our Company applies Accounting Principles Board
Assets 537 67 33 1997 Opinion No. 25 and related Interpretations in accounting for our
$ 7,758 $ 69 $ (10) plans. Accordingly, for our stock option plans, no compensation
cost has been recognized. The compensation cost that has been
charged against income for our restricted stock award plans was
Maturities of derivative financial instruments held on $56 million in 1997, $63 million in 1996 and $45 million in
December 31, 1997, are as follows (in millions): 1995. For our Incentive Unit Agreements and Performance Unit
Agreements, the charge against income was $31 million in
1998 1999 2000 2001 – 2003
1997, $90 million in 1996 and $64 million in 1995. Had
$ 4,218 $ 257 $ 426 $ 415 compensation cost for the stock option plans been determined
based on the fair value at the grant dates for awards under the
plans, consistent with the alternative method set forth under
Note 9: Commitments and Contingencies SFAS No. 123, “Accounting for Stock-Based Compensation,” our
On December 31, 1997, we were contingently liable for guar- Company’s net income, basic net income per share and diluted
antees of indebtedness owed by third parties in the amount of net income per share would have been reduced.
$409 million, of which $26 million related to independent The pro forma amounts are indicated below (in millions,
bottling licensees. except per share amounts):
We do not consider it probable that we will be required
Year Ended December 31, 1997 1996 1995
to satisfy these guarantees. The fair value of these contingent
Net income
liabilities is immaterial to our consolidated financial statements.
As reported $ 4,129 $ 3,492 $ 2,986
We believe our exposure to concentrations of credit risk
Pro forma $ 4,026 $ 3,412 $ 2,933
is limited, due to the diverse geographic areas covered by
Basic net income per share
our operations.
As reported $ 1.67 $ 1.40 $ 1.18
Additionally, under certain circumstances, we have committed
Pro forma $ 1.63 $ 1.37 $ 1.16
to make future investments in bottling companies. However, we
Diluted net income per share
do not consider any of these commitments to be individually
As reported $ 1.64 $ 1.38 $ 1.17
significant.
Pro forma $ 1.60 $ 1.35 $ 1.15

55
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Under the amended 1989 Restricted Stock Award Plan and the employees pursuant to stock options and stock appreciation
amended 1983 Restricted Stock Award Plan (the Restricted Stock rights granted under the Option Plan. The stock appreciation
Award Plans), 40 million and 24 million shares of restricted rights permit the holder, upon surrendering all or part of
common stock, respectively, may be granted to certain officers the related stock option, to receive cash, common stock or a
and key employees of our Company. combination thereof, in an amount up to 100 percent of the
On December 31, 1997, 33 million shares were available for difference between the market price and the option price.
grant under the Restricted Stock Award Plans. In 1997, 1996 Options to purchase common stock under the Option Plan
and 1995, 162,000, 210,000 and 190,000 shares of restricted have been granted to Company employees at fair market value
stock were granted at $59.75, $48.88 and $35.63, respectively. at the date of grant. Generally, stock options become exercis-
Participants are entitled to vote and receive dividends on able over a three-year vesting period and expire 10 years from
the shares, and under the 1983 Restricted Stock Award Plan, the date of grant.
participants are reimbursed by our Company for income taxes The fair value of each option grant is estimated on the date of
imposed on the award, but not for taxes generated by the grant using the Black-Scholes option-pricing model with the fol-
reimbursement payment. The shares are subject to certain lowing weighted-average assumptions used for grants in 1997,
transfer restrictions and may be forfeited if a participant leaves 1996 and 1995, respectively: dividend yields of 1.0, 1.0 and
our Company for reasons other than retirement, disability or 1.3 percent; expected volatility of 20.1, 18.3 and 20.1 percent;
death, absent a change in control of our Company. risk-free interest rates of 6.0, 6.2 and 5.9 percent; and expected
Under our 1991 Stock Option Plan (the Option Plan), a lives of four years for all years. The weighted-average fair value
maximum of 120 million shares of our common stock was of options granted was $13.92, $11.43 and $8.13 for the years
approved to be issued or transferred to certain officers and ended December 31, 1997, 1996 and 1995, respectively.

A summary of stock option activity under all plans is as follows (shares in millions):
1997 1996 1995
Weighted–Average Weighted–Average Weighted–Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
Outstanding on January 1, 78 $ 26.50 74 $ 20.74 65 $ 15.53
Granted 13 59.79 14 48.86 18 34.88
Exercised (10) 14.46 (9) 13.72 (8) 10.63
Forfeited/Expired (1) 44.85 (1) 31.62 (1) 24.84
Outstanding on December 31, 80 $ 33.22 78 $ 26.50 74 $ 20.74
Exercisable on December 31, 55 $ 24.62 51 $ 18.69 45 $ 14.22
Shares available on December 31,
for options that may be granted 34 46 59

The following table summarizes information about stock options at December 31, 1997 (shares in millions):
Outstanding Stock Options Exercisable Stock Options
Weighted–Average
Remaining Weighted–Average Weighted–Average
Range of Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
$ 4.00 to $ 10.00 11 1.5 years $ 7.33 11 $ 7.33
$ 10.01 to $ 20.00 4 3.5 years $ 14.50 4 $ 14.50
$ 20.01 to $ 30.00 24 6.1 years $ 23.71 24 $ 23.71
$ 30.01 to $ 40.00 15 7.8 years $ 35.63 11 $ 35.63
$ 40.01 to $ 50.00 13 8.8 years $ 48.86 5 $ 48.86
$ 50.01 to $ 71.00 13 9.8 years $ 59.78 — $ —
$ 4.00 to $ 71.00 80 6.7 years $ 33.22 55 $ 24.62

56
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

In 1988, our Company entered into Incentive Unit Agreements The funded status of our defined benefit plans is as follows
whereby, subject to certain conditions, certain officers were given (in millions):
the right to receive cash awards based on the market value of
Assets Exceed Accumulated
2.4 million shares of our common stock at the measurement Accumulated Benefits
dates. Under the Incentive Unit Agreements, the employee is Benefits Exceed Assets
reimbursed by our Company for income taxes imposed when December 31, 1997 1996 1997 1996

the value of the units is paid, but not for taxes generated by the Actuarial present value of
reimbursement payment. At December 31, 1996 and 1995, benefit obligations
approximately 1.6 million units were outstanding. In 1997, all Vested benefit
outstanding units were paid at a price of $58.50 per unit. obligation $ 804 $ 704 $ 328 $ 343
In 1985, we entered into Performance Unit Agreements, Accumulated benefit
whereby certain officers were given the right to receive obligation $ 872 $ 768 $ 370 $ 384
cash awards based on the difference in the market value of Projected benefit
approximately 4.4 million shares of our common stock at the obligation $ 1,016 $ 890 $ 472 $ 485
measurement dates and the base price of $2.58, the market Plan assets at fair value1 1,280 1,126 128 156
value as of January 2, 1985. At December 31, 1996 and 1995, Plan assets in excess of
approximately 2.9 million units were outstanding. In 1997, all (less than) projected
outstanding units were paid based on a market price of $58.50 benefit obligation 264 236 (344) (329)
per unit. Unrecognized net (asset)
liability at transition (30) (39) 28 36
Note 12: Pension and Other Postretirement Benefits Unrecognized prior service
Our Company sponsors and/or contributes to pension plans cov- cost 29 33 12 16
ering substantially all U.S. employees and certain employees in Unrecognized net (gain) loss (211) (191) 113 104
international locations. The benefits are primarily based on years Adjustment required to
of service and the employees’ compensation for certain periods recognize minimum liability — — (76) (66)
during the last years of employment. We generally fund pension Accrued pension asset
costs currently, subject to regulatory funding limitations. We also (liability) included in the
sponsor nonqualified, unfunded defined benefit plans for certain consolidated balance sheet $ 52 $ 39 $ (267) $ (239)
officers and other employees. In addition, our Company and its 1
Primarily listed stocks, bonds and government securities.
subsidiaries have various pension plans and other forms of
postretirement arrangements outside the United States.
Total pension expense for all benefit plans, including defined The assumptions used in computing the preceding information
benefit plans, amounted to approximately $77 million in 1997, are as follows:
$85 million in 1996 and $81 million in 1995. Net periodic
Year Ended December 31, 1997 1996 1995
pension cost for our defined benefit plans consists of the
Discount rates 7% 71/4% 7%
following (in millions):
Rates of increase in
Year Ended December 31, 1997 1996 1995 compensation levels 43/4% 43/4% 43/4%
Service cost– benefits earned Expected long-term rates of
during the period $ 49 $ 48 $ 43 return on assets 9% 81/2% 81/2%
Interest cost on projected
benefit obligation 93 91 89
Our Company has plans providing postretirement health care
Actual return on plan assets (172) (169) (211)
and life insurance benefits to substantially all U.S. employees and
Net amortization and deferral 98 103 145
certain employees in international locations who retire with a
Net periodic pension cost $ 68 $ 73 $ 66
minimum of five years of service. Net periodic cost for our
postretirement health care and life insurance benefits consists of
the following (in millions):
Year Ended December 31, 1997 1996 1995
Service cost $ 11 $ 12 $ 12
Interest cost 23 20 23
Other (2) (3) (2)
$ 32 $ 29 $ 33

57
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

In addition, we contribute to a Voluntary Employees’ Income tax expense (benefit) consists of the following
Beneficiary Association trust that will be used to partially fund (in millions):
health care benefits for future retirees. Generally, we fund bene-
Year Ended United State &
fits to the extent contributions are tax-deductible, which under December 31, States Local International Total
current legislation is limited. In general, retiree health benefits 1997
are paid as covered expenses are incurred. Current $ 240 $ 45 $ 1,261 $ 1,546
The funded status of our postretirement health care and life Deferred 180 21 179 380
insurance plans is as follows (in millions): 1996
December 31, 1997 1996 Current $ 256 $ 79 $ 914 $ 1,249
Accumulated postretirement Deferred (264) (29) 148 (145)
benefit obligations: 1995
Retirees $ 154 $ 114 Current $ 204 $ 41 $ 940 $ 1,185
Fully eligible active plan participants 41 35 Deferred 80 10 67 157
Other active plan participants 132 130
Total benefit obligation 327 279
We made income tax payments of approximately
Plan assets at fair value1 40 41
$982 million, $1,242 million and $1,000 million in 1997,
Plan assets less than benefit obligation (287) (238)
1996 and 1995, respectively.
Unrecognized prior service cost 5 5
A reconciliation of the statutory U.S. federal rate and effective
Unrecognized net gain (27) (57)
rates is as follows:
Accrued postretirement benefit
liability included in the Year Ended December 31, 1997 1996 1995
consolidated balance sheet $ (309) $ (290) Statutory U.S. federal rate 35.0% 35.0% 35.0%
1 State income taxes-net of
Consists of corporate bonds, government securities and short-term
investments. federal benefit 1.0 1.0 1.0
Earnings in jurisdictions taxed
at rates different from the
The assumptions used in computing the preceding informa-
statutory U.S. federal rate (2.6) (3.3) (3.9)
tion are as follows:
Equity income (.6) (1.7) (1.7)
Year Ended December 31, 1997 1996 1995 Tax settlement — (7.0) —
Discount rate 71/4% 73/4% 71/4% Other-net (1.0) — .6
Rates of increase in 31.8% 24.0% 31.0%
compensation levels 43/4% 5% 43/4%

Our 31.8 percent 1997 effective tax rate reflects the tax
The rate of increase in the per capita costs of covered health benefit derived from having significant operations outside the
care benefits is assumed to be 71/4 percent in 1998, decreasing United States that are taxed at rates lower than the U.S. statutory
gradually to 5 percent by the year 2002. Increasing the assumed rate of 35 percent, partially offset by the tax impact of certain
health care cost trend rate by one percentage point would gains recognized from previously discussed bottling transactions.
increase the accumulated postretirement benefit obligation as of These transactions are generally taxed at rates higher than our
December 31, 1997, by approximately $39 million and increase Company’s effective rate on operations.
the net periodic postretirement benefit cost by approximately In 1996, we reached an agreement in principle with the U.S.
$5 million in 1997. Internal Revenue Service (IRS) settling certain U.S.-related
income tax matters. The agreement included issues in litigation
Note 13: Income Taxes involving our operations in Puerto Rico, dating back to the
Income before income taxes consists of the following 1981 tax year and extending through 1995. This agreement
(in millions): resulted in a one-time reduction of $320 million to our 1996
income tax expense as a result of reversing previously accrued
Year Ended December 31, 1997 1996 1995
contingent income tax liabilities. Our 1996 effective tax rate
United States $ 1,515 $ 1,168 $ 1,270
would have been 31 percent, excluding the favorable impact of
International 4,540 3,428 3,058
the settlement with the IRS.
$ 6,055 $ 4,596 $ 4,328

58
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Appropriate U.S. and international taxes have been provided took actions to consolidate certain manufacturing operations
for earnings of subsidiary companies that are expected to be and, as a result, recorded charges to recognize the impairment
remitted to the parent company. Exclusive of amounts that of certain manufacturing assets and estimated losses on the
would result in little or no tax if remitted, the cumulative disposal of other assets.
amount of unremitted earnings from our international The remainder of this $276 million provision related to
subsidiaries that is expected to be indefinitely reinvested was actions taken by The Minute Maid Company. During the third
approximately $1,917 million on December 31, 1997. The quarter of 1996, The Minute Maid Company entered into two
taxes that would be paid upon remittance of these indefinitely significant agreements with independent parties: (1) a strategic
reinvested earnings are approximately $671 million, based on supply alliance with Sucocitrico Cutrale Ltda., the world’s
current tax laws. largest grower and processor of oranges, and (2) a joint venture
The tax effects of temporary differences and carryforwards agreement with Groupe Danone to produce, distribute and sell
that give rise to deferred tax assets and liabilities consist of the premium refrigerated juices outside the United States and
following (in millions): Canada. With these agreements, we intend to increase The
Minute Maid Company’s focus on managing its brands while
December 31, 1997 1996
seeking arrangements to lower its overall manufacturing costs.
Deferred tax assets:
In connection with these actions, we recorded $146 million in
Benefit plans $ 246 $ 414
third quarter provisions, composed primarily of impairment
Liabilities and reserves 172 164
charges to certain production facilities and reserves for losses on
Net operating loss carryforwards 72 130
the disposal of other production facilities.
Other 89 88
Also in the third quarter of 1996, we launched a strategic
Gross deferred tax assets 579 796
initiative, Project Infinity, to redesign and enhance our informa-
Valuation allowance (21) (18)
tion systems and communications capabilities. In connection
$ 558 $ 778
with this initiative, we recorded an $80 million impairment
Deferred tax liabilities:
charge in administrative and general expenses to recognize
Property, plant and equipment $ 203 $ 200
Project Infinity’s impact on existing information systems.
Equity investments 107 369
Based on management’s commitment to certain strategic
Intangible assets 164 74
actions during the third quarter of 1996, these impairment
Other 288 33
charges were recorded to reduce the carrying value of identified
$ 762 $ 676
assets to fair value. Fair values were derived using a variety of
Net deferred tax asset (liability)1 $ (204) $ 102
methodologies, including cash flow analysis, estimates of sales
1
Deferred tax assets of $244 million and $403 million have been included in proceeds and independent appraisals.
the consolidated balance sheet caption “marketable securities and other Also in the third quarter of 1996, we recorded a $28.5 million
assets” at December 31, 1997 and 1996, respectively.
charge in administrative and general expenses as a result of our
decision to make a contribution to The Coca-Cola Foundation, a
On December 31, 1997, we had $180 million of operating loss not-for-profit charitable organization.
carryforwards available to reduce future taxable income of certain During 1995, selling, administrative and general expenses
international subsidiaries. Loss carryforwards of $11 million included provisions of $86 million to increase efficiencies in our
must be utilized within the next five years; $169 million can be operations in North America and Europe.
utilized over an indefinite period. A valuation allowance has been
provided for a portion of the deferred tax assets related to these
loss carryforwards.

Note 14: Nonrecurring Items

In the second quarter of 1997, we recorded a nonrecurring
charge of $60 million in selling, administrative and general
expenses related to enhancing manufacturing efficiencies in
North America.
In the third quarter of 1996, we recorded provisions of
approximately $276 million in selling, administrative and
general expenses related to our plans for strengthening our
worldwide system. Of this $276 million, approximately
$130 million related to streamlining our operations, primarily
in Greater Europe and Latin America. Our management

59
Notes to Consolidated Financial Statements T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Note 15: Operations in Geographic Areas

Information about the Company’s operations by geographic area is as follows (in millions):

Nor th Greater Latin Middle &

America Africa Europe America Far East Corporate Consolidated
1997
Net operating revenues $ 6,443 $ 582 $ 5,395 $ 2,124 $ 4,256 $ 68 $ 18,868
Operating income 1,3112 165 1,479 957 1,508 (419) 5,001
Identifiable operating assets 4,429 418 2,410 1,593 1,624 1,5721 12,046
Equity income 155 155
Investments (principally bottling companies) 4,894 4,894
Capital expenditures 261 17 327 78 196 214 1,093
Depreciation and amortization 195 22 123 99 106 81 626
1996
Net operating revenues $ 6,050 $ 482 $ 5,959 $ 2,040 $ 4,095 $ 47 $ 18,673
Operating income 9493 1183 1,2773 8153 1,3583 (602)3 3,915
Identifiable operating assets 3,814 326 2,896 1,405 1,463 2,0881 11,992
Equity income 211 211
Investments (principally bottling companies) 4,169 4,169
Capital expenditures 261 32 379 79 121 118 990
Depreciation and amortization 188 12 190 83 84 76 633
1995
Net operating revenues $ 5,513 $ 603 $ 6,007 $ 1,955 $ 3,994 $ 55 $ 18,127
Operating income 8564 205 1,2564 798 1,394 (483) 4,026
Identifiable operating assets 3,478 348 4,301 1,294 1,445 1,4611 12,327
Equity income 169 169
Investments (principally bottling companies) 2,714 2,714
Capital expenditures 286 19 383 87 85 77 937
Depreciation and amortization 156 13 192 64 71 66 562

Intercompany transfers between geographic areas are not material.

North America includes only the United States and Canada.
Certain prior year amounts 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 North America was reduced by $60 million for provisions related to enhancing manufacturing efficiencies.
3 Operating income for North America, Africa, Greater Europe, Latin America and the Middle & Far East was reduced by $153 million, $7 million,

$66 million, $32 million and $18 million, respectively, for provisions related to management’s strategic plans to strengthen our worldwide system. Corporate
operating income was reduced by $80 million for Project Infinity’s impairment impact to existing systems and by $28.5 million for our decision to contribute
to The Coca-Cola Foundation.
4 Operating income for North America and Greater Europe was reduced by $61 million and $25 million, respectively, for provisions to increase efficiencies.

Compound Growth Rates Nor th Greater Latin Middle &

Ending 1997 America Africa Europe America Far East Consolidated
Net operating revenues
5 years 7% 19% 4% 9% 13% 8%
10 years 6% 17% 13% 14% 9% 9%
Operating income
5 years 13% 5% 8% 14% 12% 13%
10 years 12% 13% 13% 20% 13% 14%

60
 T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Net Operating Revenues by Geographic Area1

Report of Independent Auditors

North America Latin America

Africa Middle & Far East
Greater Europe
Board of Directors and Share Owners
The Coca-Cola Company
We have audited the accompanying consolidated balance sheets
23% 22%
of The Coca-Cola Company and subsidiaries as of December
22%
31, 1997 and 1996, and the related consolidated statements of
11% 11%
11% income, share-owners’ equity, and cash flows for each of the
three years in the period ended December 31, 1997. These
29% 32% 33% financial statements are the responsibility of the Company’s
3% 3% 3% management. Our responsibility is to express an opinion on
34%
these financial statements based on our audits.
32% 31%
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
1997 1996 1995 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
Operating Income by Geographic Area1 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
North America Latin America reasonable basis for our opinion.
Africa Middle & Far East In our opinion, the financial statements referred to above
Greater Europe present fairly, in all material respects, the consolidated financial
position of The Coca-Cola Company and subsidiaries at
December 31, 1997 and 1996, and the consolidated results of
28% their operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with
30% 31% generally accepted accounting principles.
18%

18% 18%
27%
28% 28%
3%
3% 4%
24%
21% 19%

1997 1996 1995 Atlanta, Georgia

January 23, 1998

1 Charts and percentages are calculated exclusive of corporate

operations.

61
 Report of Management T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

We are responsible for the preparation and integrity of the the consolidated financial statements of The Coca-Cola
consolidated financial statements appearing in our Annual Company and subsidiaries and conduct such tests and related
Report. The financial statements were prepared in conformity procedures as it deems necessary in conformity with generally
with generally accepted accounting principles appropriate in accepted auditing standards. The opinion of the independent
the circumstances and, accordingly, include certain amounts auditors, based upon their audits of the consolidated financial
based on our best judgments and estimates. Financial infor- statements, is contained in this Annual Report.
mation in this Annual Report is consistent with that in the
financial statements.
We are responsible for maintaining a system of internal
accounting controls and procedures to provide reasonable
assurance, at an appropriate cost/benefit relationship, that
assets are safeguarded and that transactions are authorized,
recorded and reported properly. The internal accounting
control system is augmented by a program of internal audits M. Douglas Ivester
and appropriate reviews by management, written policies and Chairman, Board of Directors,
guidelines, careful selection and training of qualified personnel and Chief Executive Officer
and a written Code of Business Conduct adopted by our
Company’s Board of Directors, applicable to all employees
of our Company and our subsidiaries. In our opinion, our
Company’s internal accounting controls provide reasonable
assurance that assets are safeguarded against material loss from
unauthorized use or disposition and that the financial records
are reliable for preparing financial statements and other data
and for maintaining accountability of assets. James E. Chestnut
The Audit Committee of our Company’s Board of Directors, Senior Vice President
composed solely of Directors who are not officers of our and Chief Financial Officer
Company, meets with the independent auditors, management
and internal auditors periodically to discuss internal accounting
controls and auditing and financial reporting matters. The
Committee reviews with the independent auditors the scope
and results of the audit effort. The Committee also meets
periodically with the independent auditors and the chief inter-
nal auditor without management present to ensure that the
independent auditors and the chief internal auditor have free
access to the Committee. Gary P. Fayard
The independent auditors, Ernst & Young LLP, are recom- Vice President
mended by the Audit Committee of the Board of Directors, and Controller
selected by the Board of Directors and ratified by our
Company’s share owners. Ernst & Young LLP is engaged to audit January 23, 1998

62
 T H E C O C A – C O L A C O M PA N Y A N D S U B S I D I A R I E S

Quarterly Data (Unaudited)

(In millions except per share data)

First Second Third Four th Full

Year Ended December 31, Quar ter Quar ter Quar ter Quar ter Year
1997
Net operating revenues $ 4,138 $ 5,075 $ 4,954 $ 4,701 $ 18,868
Gross profit 2,843 3,466 3,295 3,249 12,853
Net income 987 1,314 1,011 817 4,129
Basic net income per share .40 .53 .41 .33 1.67
Diluted net income per share .39 .52 .40 .33 1.64
1996
Net operating revenues $ 4,224 $ 5,286 $ 4,687 $ 4,476 $ 18,673
Gross profit 2,694 3,380 2,873 2,988 11,935
Net income 713 1,050 967 762 3,492
Basic net income per share .28 .42 .39 .31 1.40
Diluted net income per share .28 .42 .38 .30 1.38

The first quarter of 1997 includes a gain of approximately $352 million ($.08 per share after income taxes, basic and diluted) on the sale of our 49 percent
interest in Coca-Cola & Schweppes Beverages Ltd. to Coca-Cola Enterprises.

The second quarter of 1997 includes noncash gains on the issuance of stock by Coca-Cola Amatil of approximately $343 million ($.08 per share after
income taxes, basic and diluted). The second quarter of 1997 also includes provisions related to enhancing manufacturing efficiencies in North America
of $60 million ($.02 per share after income taxes, basic and diluted).

The third quarter of 1997 includes a gain of approximately $156 million ($.04 per share after income taxes, basic and diluted) on the sale of our
48 percent interest in Coca-Cola Beverages Ltd. of Canada and our 49 percent interest in The Coca-Cola Bottling Company of New York, Inc. to
Coca-Cola Enterprises.

The third quarter of 1996 includes a noncash gain from a tax settlement with the IRS for $320 million ($.13 per share after income taxes, basic and
diluted), an impairment charge of $80 million ($.02 per share after income taxes, basic and diluted) to recognize Project Infinity’s impact on existing
information systems, a $28.5 million ($.01 per share after income taxes, basic and diluted) charge for our decision to make a contribution to The
Coca-Cola Foundation, a not-for-profit charitable organization and provisions related to management’s strategic plans to strengthen our worldwide system of
$276 million ($.07 per share after income taxes, basic and diluted). In addition, the third quarter of 1996 includes noncash gains on the issuance of stock by
Coca-Cola Amatil of $130 million ($.03 per share after income taxes, basic and diluted) and CCEAG of $283 million ($.04 per share after income taxes, basic
and diluted).

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 1997
and 1996.
First Second Third Four th
Quar ter Quar ter Quar ter Quar ter
1997
High $ 63.25 $ 72.63 $ 71.94 $ 67.19
Low 51.13 52.75 55.06 51.94
Close 55.75 68.00 61.00 66.69
1996
High $ 42.69 $ 49.50 $ 53.88 $ 54.25
Low 36.06 39.13 44.25 46.88
Close 41.38 49.00 50.88 52.63

63
 Our Management

Corporate Officers

M. Douglas Ivester1 Senior Vice Presidents Vice Presidents James E. Chestnut

Chairman, Anton Amon1 Carolyn H. Baldwin Chief Financial Officer
Board of Directors, William P. Casey1 Lawrence R. Cowart Joseph R. Gladden, Jr.
and Chief Executive Officer James E. Chestnut1 William J. Davis General Counsel
Ralph H. Cooper1 Daniel B. Dennison
David M. Taggart
Douglas N. Daft1 Randal W. Donaldson Treasurer
John J. Gillin Gary P. Fayard1
Gary P. Fayard
Joseph R. Gladden, Jr.1 Charles S. Frenette
Controller
George Gourlay1 Charles B. Fruit
Timothy J. Haas1 Robert D. Guy Susan E. Shaw
Secretary
Earl T. Leonard, Jr.1 William S. Herald
Alex Malaspina Juan D. Johnson 1 Officers subject to the reporting
Jack L. Stahl1 Ingrid S. Jones requirements of Section 16 of
the Securities Exchange Act of
Carl Ware1 Carl K. Kooyoomjian
1934.
Sergio S. Zyman1 William R. Newton
Judith A. Rosenblum
Connell Stafford, Jr.
David M. Taggart
Charles L. Wallace
Michael W. Walters
Steve M. Whaley

Operating Officers

Africa Group Greater Europe Group Middle and Far East Group North America Group
Carl Ware William P. Casey Douglas N. Daft Jack L. Stahl
President President President President

Stuart A. Eastwood Gavin J. Darby A.R.C. Allan Andrew P. Angle

Northern Africa Division Northwest European Division Middle East and North Africa Coca–Cola USA Operations
Division
Charles S. Frenette José J. Nuñez–Cervera Jeffrey T. Dunn
Southern Africa Division Iberian Division P. Michael Bascle Coca–Cola Fountain
Southeast and West Asia
Michael O’Neill Anthony G. Eames
Latin America Group Division
Nordic & Northern Eurasia Coca–Cola Ltd., Canada
Timothy J. Haas
Division John M. Farrell
President
China Division The Minute Maid Company
John Sechi
Stuart F. Cross Ralph H. Cooper
Central Mediterranean C. Patrick Garner
Central America and President
Division Philippines Division
Caribbean Division
John K. Sheppard Michael W. Hall
Jorge Hurtado
East Central European Japan Division
Andean Division
Division
Mary Minnick
Glenn G. Jordan
Patrick C. Smyth South Pacific Division
River Plate Division
German Division
Donald W. Short
Luiz Lobão
India Division
Brazil Division

Jose Octavio Reyes

Mexico Division

Brent D. Willis
VeneCol Division

64
 Our Board

Herbert A. Allen 2,3,4 Sam Nunn 2,3

President and Partner in the law firm of
Chief Executive Officer King & Spalding
The investment banking firm
Allen & Company Paul F. Oreffice 2,4,5
Incorporated Former Chairman of the Board
The Dow Chemical Company
Ronald W. Allen 3,5
Consultant to, Advisory Director, James D. Robinson III 5,6
and former Chairman of the Chairman and
Board, President and Chief Executive Officer
Chief Executive Officer RRE Investors, LLC
Delta Air Lines, Inc. A private venture
investment firm
Cathleen P. Black 1,6 Chairman
President The investment banking firm
Hearst Magazines Violy, Byorum & Partners
Holdings, LLC
Warren E. Buffett 1,2
Chairman of the Board and Peter V. Ueberroth 1,4
Chief Executive Officer Investor
The diversified Managing Director
holding company The management company
Berkshire Hathaway Inc. The Contrarian Group, Inc.
Charles W. Duncan, Jr. 1,3 James B. Williams 2,3
Private Investor Chairman and
M. Douglas Ivester 3 Chief Executive Officer
Chairman, Board of Directors, SunTrust Banks, Inc.
and Chief Executive Officer 1 Audit Committee
The Coca–Cola Company 2 Finance Committee
3 Executive Committee
4 Compensation Committee
Susan B. King 4,6
5 Committee on Directors
Leader in Residence 6 Public Issues Review Committee

Hart Leadership Program

Duke University

Donald F. McHenry 1,5,6

Distinguished Professor
in the Practice of Diplomacy
at the School of Foreign Service
Georgetown University

I n Tr i b u t e

Roberto C. Goizueta
N OV E M B E R 1 8 , 1 9 3 1 — O C TO B E R 1 8 , 1 9 9 7

Among our pioneers, none stood taller

in creating value for our share owners.

65
 Share-Owner Information

Common Stock Annual Meeting of Share Owners

Ticker symbol: KO April 15, 1998, 9 a.m. local time
The Coca–Cola Company is one of 30 companies The Playhouse Theatre
in the Dow Jones Industrial Average. Du Pont Building
Share owners of record at year end: 366,279 10th and Market Streets
Shares outstanding at year end: 2.47 billion Wilmington, Delaware

Stock Exchanges Corporate Offices

The Coca–Cola Company
Inside the United States:
One Coca–Cola Plaza
Common stock listed and traded: New York Stock Exchange, the
Atlanta, Georgia 30313
principal market for our common stock.
Common stock traded: Boston, Cincinnati, Chicago, Pacific and
Philadelphia stock exchanges.
Institutional Investor Inquiries
(404) 676–5766
Outside the United States:
Common stock listed and traded: The German exchange in Share-Owner Account Assistance
Frankfurt and the Swiss exchange in Zurich. For address changes, dividend checks, direct deposit of dividends,
account consolidation, registration changes, lost stock certificates,
Dividends stock holdings and the Dividend and Cash Investment Plan,
At its February 1998 meeting, our Board increased our quarterly please contact:
dividend to 15 cents per share, equivalent to an annual dividend of Registrar and Transfer Agent
60 cents per share. The Company has increased dividends each of First Chicago Trust Company of New York
the last 36 years. P.O. Box 2500
The Coca–Cola Company normally pays dividends four times a Jersey City, NJ 07303–2500
year, usually on April 1, July 1, October 1 and December 15. The Toll–free: (888) COKESHR (265–3747)
Company has paid 307 consecutive quarterly dividends, beginning For hearing impaired: (201) 222–4955
in 1920. E–mail: fctc@[Link]
Internet: [Link]
Dividend and Cash Investment Plan
The Dividend and Cash Investment Plan permits share owners of Information Resources
record to reinvest dividends from Company stock in shares of The
Publications
Coca–Cola Company. The Plan provides a convenient, economical
The Company’s Annual and Interim Reports, Proxy Statement,
and systematic method of acquiring additional shares of our com–
Form 10-K and Form 10-Q reports are available free of charge
mon stock. All share owners of record are eligible to participate.
upon request from our Industry & Consumer Affairs Department
Share owners also may purchase Company stock through voluntary
at the Company’s corporate address, listed above. Also available
cash investments of up to $125,000 per year.
is “The Chronicle of Coca–Cola Since 1886.”
All brokerage commissions associated with purchases made
through the Plan are paid by the Company. Internet Site
The Plan’s administrator, First Chicago Trust Company of New Our site at [Link] offers information about
York, purchases stock for voluntary cash investments beginning our Company, as well as periodic marketing features.
the first business day of each month, except in December when
Hotline
purchases begin on the 15th; dividend reinvestment purchases
The Company’s hotline, (800) INVSTKO (468–7856), offers taped
begin on April 1, July 1, October 1 and December 15.
highlights from the most recent quarter and may be used to
If your shares are held in street name by your broker and you are
request the most recent quarterly results news release.
interested in participating in the Dividend and Cash Investment
Plan, you may have your broker transfer the shares to First Chicago Audio Annual Report
Trust Company of New York electronically through the Direct An audiocassette version of this report is available without charge as
Registration System. a service to the visually impaired. To receive a copy, please contact
At year end, 69 percent of the Company’s share owners of record our Industry & Consumer Affairs Department at (800) 571–2653.
were participants in the Plan. In 1997, share owners invested Duplicate Mailings
$39 million in dividends and $124 million in cash in the Plan. If you are receiving duplicate or unwanted copies of our publica–
tions, please contact First Chicago Trust Company of New York at
one of the numbers listed above.

66
 Glossary

Bottling Partner or Bottler: Businesses — generally, but not always, Return on Capital: Calculated by dividing income from continuing
independently owned — that buy concentrates or syrups from the Company, operations — before changes in accounting principles, adjusted for interest
convert them into finished packaged products and sell them to customers. expense — by average total capital.

The Coca–Cola System: The Company and its bottling partners. Return on Common Equity: Calculated by dividing income from continuing
operations — before changes in accounting principles, less preferred stock
Concentrate or Beverage Base: Material manufactured from Company–

Printing: Anderson Lithograph

dividends — by average common share–owners’ equity.
defined ingredients and sold to bottlers for use in the preparation of finished
beverage through the addition of sweetener and/or water. Serving: Eight U.S. fluid ounces of a beverage.

Consolidated Bottling Operation (CBO): Bottler in which The Coca–Cola Share of Sales: Company’s unit case volume as a percentage of the
Company holds controlling ownership. The bottler’s financial results are total unit case volume of the soft–drink category of the commercial
consolidated into the Company’s financial statements. beverages industry.

Consumer: Person who consumes Company products. Soft Drink: Nonalcoholic carbonated beverage containing flavorings and
sweeteners. Excludes flavored waters and carbonated or noncarbonated
Cost of Capital: Blended cost of equity and borrowed funds used to invest
teas, coffees and sports drinks.
in operating capital required for business.

Executive Photography: Gregory Heisler

Syrup: Concentrate mixed with sweetener and water, sold to bottlers and
Customer: Retail outlet, restaurant or other operation that sells or serves
customers who add carbonated water to produce finished soft drinks.
Company products directly to consumers.
Total Capital: Equals share–owners’ equity plus interest–bearing debt.
Derivatives: Contracts or agreements, the value of which is linked to
interest rates, exchange rates, prices of securities, or financial or Total Market Value of Common Stock: Stock price at year end multiplied by
commodity indices. The Company uses derivatives to reduce its exposure to the number of shares outstanding at year end.
adverse fluctuations in interest and exchange rates and other market risks.
Unit Case: Unit of measurement equal to 24 eight–U.S.–fluid–ounce servings.
Dividend Payout Ratio: Calculated by dividing cash dividends on common
Unit Case Volume: Number of unit cases sold by bottling partners to
stock by net income available to common share owners.
customers; considered an excellent indicator of the underlying strength
Economic Profit: Income from continuing operations, after taxes, excluding of soft–drink sales in a particular market. Company unit case volume
interest, in excess of a computed capital charge for average operating primarily includes products reported as gallon shipments and other key
capital employed. products owned by our bottlers. Excludes products distributed by The
Principal Photography: François Robert

Minute Maid Company.

Economic Value Added: Growth in economic profit from year to year.
Environmental Statement: The Coca–Cola Company is dedicated to
Fountain: System used by retail outlets to dispense product into cups or
environmental excellence. While our environmental impact is small, we
glasses for immediate consumption.
are committed to managing that impact in a positive manner — just as we
Free Cash Flow: Cash provided by operations less cash used in investing would any other business issue. One of the ways we do that is through EMS
activities. The Company uses free cash flow along with borrowings to pay 2000, our comprehensive environmental management system. EMS 2000
dividends and make share repurchases. includes extensive policies, provides environmental training and requires
Gallon Sales (Shipments): Unit of measurement for concentrates periodic environmental audits of our facilities. Through programs such as
(expressed in equivalent gallons of syrup) and syrups sold by the Company Waste $mart — our waste minimization initiative in our facilities — and
to its bottling partners or customers. others like it, we have achieved significant progress in areas such as source
reduction, recycling, water and energy conservation and wastewater quality.
Gross Margin: Calculated by dividing gross profit by net operating
In 1997, the Company received a Best–of–the–Best Stratospheric Protection
revenues.
Design: EAI/Atlanta

Award from the U.S. Environmental Protection Agency in recognition of our

Interest Coverage Ratio: Income before taxes, excluding unusual leadership in protecting the Earth’s ozone layer.
items, plus interest expense divided by the sum of interest expense and
Equal Opportunity Policy: The Coca–Cola Company and its subsidiaries
capitalized interest.
employ nearly 30,000 people. We maintain a long–standing commitment to
KO: The ticker symbol for stock of The Coca–Cola Company. equal opportunity, affirmative action and valuing the diversity of our
employees, share owners, customers and consumers. The Company strives
Market: Geographic area in which the Company and its bottling partners do
This entire report is printed on recycled paper.

to create a working environment free of discrimination and harassment

business, often defined by national boundaries.
with respect to race, sex, color, national origin, religion, age, sexual
The Minute Maid Company: A Company operating group responsible for orientation, disability, being a special disabled veteran or being a veteran
producing, marketing and distributing juice and juice–drink products, with of the Vietnam era, as well as to make reasonable accommodations in
principal operations in the United States and Canada. the employment of qualified individuals with disabilities. The Company
Net Debt and Net Capital: Debt and capital in excess of cash, cash maintains ongoing contact with labor and employee associations to
equivalents and marketable securities not required for operations and develop relationships that foster responsive and mutually beneficial
discussions pertaining to labor issues. These associations have provided a
47 Billion to Go certain temporary bottling investments.
mechanism for positive industrial relations. In addition, we provide
Operating Margin: Calculated by dividing operating income by net fair marketing opportunities to all suppliers and maintain programs
operating revenues. to increase transactions with firms that are owned and operated by
Per Capita Consumption: Average number of 8–ounce servings consumed minorities and women.
per person, per year in a specific market. Company per capita consumption
is calculated by multiplying our unit case volume by 24, and dividing
by the population.
 The Coca-Cola Company 1997 Annual Report
Thanks a Billion!

With deep gratitude, the nearly 30,000 men and women of

The Coca-Cola Company salute our share owners, customers,
consumers and bottling partners around the world. Without
you, the success we enjoy today would not be possible.

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