Notes to Condensed Consolidated Financial Statements
NOTE 1—BUSINESS AND REPORTING POLICIES
Business
Coca-Cola Enterprises, Inc. (“CCE,” “we,” “our,” or “us”) is a marketer, producer, and distributor of nonalcoholic beverages. We market, produce, and distribute our products to customers and consumers through licensed territory agreements in Belgium, continental France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway, and Sweden. We operate in the highly competitive beverage industry and face strong competition from other general and specialty beverage companies. Our financial results are affected by a number of factors including, but not limited to, consumer preferences, cost to manufacture and distribute products, foreign currency exchange rates, general economic conditions, local and national laws and regulations, raw material availability, and weather patterns.
Sales of our products tend to be seasonal, with the second and third quarters accounting for higher unit sales of our products than the first and fourth quarters. In a typical year, we earn more than
60 percent
of our annual operating income during the second and third quarters. The seasonality of our sales volume, combined with the accounting for fixed costs, such as depreciation, amortization, rent, and interest expense, impacts our results on a quarterly basis. Additionally, year-over-year shifts in holidays and selling days can impact our results on an interim period basis. Accordingly, our results for the
first
quarter of
2016
may not necessarily be indicative of the results that may be expected for the full year ending
December 31, 2016
.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and expense allocations) considered necessary for fair presentation have been included. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying Notes contained in our Annual Report on Form 10-K for the year ended
December 31, 2015
(Form 10-K).
Our Condensed Consolidated Financial Statements include all entities that we control by ownership of a majority voting interest. All significant intercompany accounts and transactions are eliminated in consolidation.
For reporting convenience, our first three quarters close on the Friday closest to the end of the quarterly calendar period. Our fiscal year ends on December 31st. There was one less selling day in the first quarter of 2016 versus the first quarter of 2015, and there will be one additional selling day in the fourth quarter of 2016 versus the fourth quarter of 2015 (based upon a standard five-day selling week).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
2016
|
66
|
|
|
65
|
|
|
65
|
|
|
65
|
|
|
261
|
|
2015
|
67
|
|
|
65
|
|
|
65
|
|
|
64
|
|
|
261
|
|
Change
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Recently Adopted Accounting Standards
In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03, “Interest – Imputation of Interest,” requiring entities to present debt issuance costs related to a debt liability as a reduction of the carrying amount of the liability. The guidance was effective on January 1, 2016. As a result,
$15 million
of unamortized debt issuance costs were retrospectively adjusted from other noncurrent assets to debt, less current portion in the Company’s Condensed Consolidated Balance Sheet as of
December 31, 2015
.
Recently Issued Accounting Standards
In March 2016, the FASB issued ASU 2016-09, “Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and is to be applied utilizing a modified retrospective approach. We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements.
NOTE 2—MERGER AGREEMENT
On August 6, 2015, we entered into agreements with The Coca-Cola Company (TCCC), Coca-Cola Iberian Partners (CCIP), the privately-owned Coca-Cola bottler operating primarily in Spain and Portugal, and Coca-Cola Erfrischungsgetränke (CCEG), the wholly-owned TCCC bottler operating in Germany, under which:
|
|
•
|
The parties agreed to combine their respective businesses by combining CCE, CCIP, and CCEG. The combination (the Merger) will be effected through the contribution of CCIP and CCEG to a newly created entity, Coca-Cola European Partners, plc (CCEP), and the merger of CCE with and into a newly formed indirect U.S. subsidiary of CCEP (MergeCo), with MergeCo continuing as the surviving entity. Upon completion of the Merger, CCEP will consist of businesses involved in the marketing, production, and distribution of beverages in Andorra, Belgium, France, Germany, Great Britain, Luxembourg, Monaco, the Netherlands, Norway, Portugal, Spain, and Sweden.
|
|
|
•
|
At the effective time of the Merger, each outstanding share of common stock of CCE will be converted into the right to receive
one
ordinary share of CCEP and a cash payment of
$14.50
. At closing, on a fully diluted basis CCIP and TCCC will own
34 percent
and
18 percent
of CCEP, respectively, with CCE shareowners owning
48 percent
.
|
|
|
•
|
Following the Merger, CCEP will directly and indirectly wholly-own all contributed assets and liabilities of CCE, CCIP, and CCEG.
|
|
|
•
|
At the time of the Merger, CCEP’s ordinary shares are expected to be listed for trading on the New York Stock Exchange, Euronext Amsterdam Stock Exchange, and Euronext London Stock Exchange. In addition, listings on the Barcelona, Bilbao, Madrid, and Valencia Stock Exchanges for trading through the Spanish Automated Quotation System is being pursued.
|
The consummation of the Merger is subject to various conditions including, among others, obtaining the approval of at least a majority of CCE’s shareholders, the availability of cash in an amount sufficient to pay the cash payment for the Merger, the New York Stock Exchange approving the listing of shares of CCEP, the shares of CCEP being admitted to listing and trading on the Euronext Amsterdam Stock Exchange, the approval by the UK Financial Conduct Authority of CCEP’s prospectus complying with the European prospectus directive, the filing and effectiveness of CCEP’s registration statement on Form F-4, the receipt by CCE, TCCC, and CCIP of certain tax opinions, the absence of legal prohibitions and the receipt of requisite regulatory approvals, the absence of pending actions by any governmental entity that would prevent the consummation of the Merger, and TCCC having executed new bottling agreements for CCEP having an initial
10
-year term with a
10
-year renewal term and, except as otherwise agreed, containing other terms materially similar to those currently in effect at CCE, CCIP, and CCEG. The Form F-4 was declared effective by the Securities and Exchange Commission (SEC) on April 11, 2016. Each party’s obligation to close is further subject to there being no material adverse breach by the other parties. The obligations of the parties to close is further conditioned on the completion of a capital restructuring of CCIP and obtaining the approval of
80 percent
of shareholders of CCIP in favor of the Merger. The CCIP capital restructuring and shareholder approval were fulfilled on November 11, 2015. Each of the parties has generally agreed to use all reasonable endeavors to take such steps to satisfy the remaining conditions. If the conditions to the completion are not satisfied by August 6, 2016, any conditions become impossible to be satisfied by such date, or any breach of other covenants or warranties occurs that would result in a material adverse effect in respect of the breaching party and such breach cannot be cured before August 6, 2016, or, if curable, is not cured within
30 days
following the delivery of a written notice, then the Merger may be terminated.
The agreements set out certain covenants the parties must comply with prior to completion, including carrying out the agreed transaction steps, the consummation of the CCIP capital restructuring, and the removal of certain assets and liabilities from CCIP that are not being transferred to CCEP. The parties have agreed to cooperate in making employee notifications, competition approvals, securities laws filings and listing applications, and obtaining financing. The parties have agreed to use their reasonable endeavors to negotiate and agree on CCEP’s new bottling agreements, an initial business plan, and a long-range business plan.
The parties have also agreed to cause CCIP and CCEP and its subsidiaries, as buyers, to enter into a share purchase agreement shortly after the completion of the Merger, on terms satisfactory to the parties, with Cobega S.A. and Solinbar, S.L.U., as sellers, for the sale of Vifilfell hf. (the entity that owns the Coca-Cola bottling business in Iceland) for aggregate consideration of no more than
€35 million
.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
The agreements contain customary warranties of the parties regarding their respective businesses. The warranties of CCE, CCIP, CCEG, and an entity to be established for the purposes of holding CCIP will survive for
three months
after the date that CCEP files its December 31, 2016 Form 20-F with the SEC. In the event of a breach of
one
or more warranties that results in an indemnification claim amount against a particular company for more than
$400 million
, the relative equity ownership percentages of CCEP will be adjusted by issuing additional shares to increase the ownership of the non-breaching parties to reflect the indemnification claim amount, not to exceed
$450 million
.
The agreements contain specified termination rights. The agreements can be terminated if the parties fail to perform their representations, warranties, covenants or agreements, if any court of competent jurisdiction or any governmental authority issues an order, decree or ruling or takes any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the transactions or if the CCE Board of Directors withdraws, modifies, or qualifies its recommendation to shareholders regarding the adoption of the merger agreements. Upon termination under specified circumstances, including upon a termination resulting from a change in the CCE Board of Directors recommendation to shareholders, CCE would be required to pay CCEP a termination fee of
$450 million
.
We expect to incur total Merger expenses of approximately
$140 million
through its consummation. During the first quarter of
2016
, we incurred expenses totaling
$12 million
related to the Merger. As of
April 1, 2016
we had incurred
$57 million
in cumulative expenses related to the Merger. These expenses are included in selling, delivery, and administrative (SD&A) expenses on our Condensed Consolidated Statements of Income.
CCE has been named in
three
lawsuits related to the Merger. By consent order dated January 7, 2016, these cases were consolidated. On March 2, 2016, the plaintiffs filed a consolidated amended class action complaint making similar allegations regarding the Merger and adding allegations regarding the Form F-4. For additional information about these lawsuits, refer to Note 9.
CCEP and/or its subsidiaries intend to finance the cash payment in the Merger primarily using debt financing in either the public or private markets. CCEP expects to have financing in place during the second quarter of
2016
.
NOTE 3—INVENTORIES
We value our inventories at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. The following table summarizes our inventories as of the dates presented (in millions):
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|
|
|
|
|
|
|
|
|
April 1,
2016
|
|
December 31,
2015
|
Finished goods
|
$
|
249
|
|
|
$
|
209
|
|
Raw materials and supplies
|
122
|
|
|
127
|
|
Total inventories
|
$
|
371
|
|
|
$
|
336
|
|
NOTE 4—PROPERTY, PLANT, AND EQUIPMENT
The following table summarizes our property, plant, and equipment as of the dates presented (in millions):
|
|
|
|
|
|
|
|
|
|
April 1,
2016
|
|
December 31,
2015
|
Land
|
$
|
133
|
|
|
$
|
131
|
|
Building and improvements
|
917
|
|
|
894
|
|
Machinery, equipment, and containers
|
1,270
|
|
|
1,255
|
|
Cold-drink equipment
|
1,240
|
|
|
1,186
|
|
Vehicle fleet
|
70
|
|
|
66
|
|
Furniture, office equipment, and software
|
301
|
|
|
287
|
|
Property, plant, and equipment
|
3,931
|
|
|
3,819
|
|
Accumulated depreciation and amortization
|
(2,119
|
)
|
|
(2,036
|
)
|
|
1,812
|
|
|
1,783
|
|
Construction in process
|
188
|
|
|
137
|
|
Property, plant, and equipment, net
|
$
|
2,000
|
|
|
$
|
1,920
|
|
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
NOTE 5—ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The following table summarizes our accounts payable and accrued expenses as of the dates presented (in millions):
|
|
|
|
|
|
|
|
|
|
April 1,
2016
|
|
December 31,
2015
|
Trade accounts payable
|
$
|
528
|
|
|
$
|
486
|
|
Accrued customer marketing costs
|
539
|
|
|
508
|
|
Accrued compensation and benefits
|
226
|
|
|
213
|
|
Accrued taxes
|
174
|
|
|
162
|
|
Accrued deposits
|
54
|
|
|
51
|
|
Other accrued expenses
|
245
|
|
|
181
|
|
Accounts payable and accrued expenses
|
$
|
1,766
|
|
|
$
|
1,601
|
|
NOTE 6—RELATED PARTY TRANSACTIONS
Transactions with The Coca-Cola Company (TCCC)
We are a marketer, producer, and distributor principally of products of TCCC, with greater than
90 percent
of our sales volume consisting of sales of TCCC products. Our license arrangements with TCCC are governed by product licensing agreements. From time to time, the terms and conditions of these agreements with TCCC are modified.
The following table summarizes the transactions with TCCC that directly affected our Condensed Consolidated Statements of Income for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
2016
|
|
2015
|
Amounts affecting net sales:
|
|
|
|
Fountain syrup and packaged product sales
|
$
|
5
|
|
|
$
|
3
|
|
Amounts affecting cost of sales:
|
|
|
|
Purchases of concentrate, syrup, mineral water, and juice
|
$
|
(438
|
)
|
|
$
|
(481
|
)
|
Purchases of finished products
|
(9
|
)
|
|
(11
|
)
|
Marketing support funding earned
|
47
|
|
|
46
|
|
Total
|
$
|
(400
|
)
|
|
$
|
(446
|
)
|
On August 6, 2015, we entered into agreements with TCCC, CCIP, and CCEG related to the pending merger to form CCEP. For more information about the pending Merger to form CCEP, refer to Note 2.
We and TCCC reached an understanding on a new incidence-based concentrate pricing model and funding program effective on January 1, 2016. The term of this new understanding is tied to the term of our bottling agreements, which expire on October 2, 2020. If our bottling agreements are terminated due to the closing of the proposed Merger, this understanding will continue until the commencement of a new incidence pricing agreement between TCCC and CCEP. Under the new funding program, the
$45 million
Global Marketing Fund (GMF), which terminated December 31, 2015, has been replaced by the integration of
$20 million
into the incidence rate and annual payments of
$25 million
from TCCC to us to support the execution of commercial strategies focused on capturing growth opportunities. This
$25 million
funding will be paid in
two
equal installments each year.
For additional information about our relationship with TCCC, refer to Note 4 of the Notes to Consolidated Financial Statements in our Form 10-K.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
NOTE 7—DERIVATIVE FINANCIAL INSTRUMENTS
We utilize derivative financial instruments to mitigate our exposure to certain market risks associated with our ongoing operations. The primary risks that we seek to manage through the use of derivative financial instruments include currency exchange risk, commodity price risk, and interest rate risk. All derivative financial instruments are recorded at fair value on our Condensed Consolidated Balance Sheets. We do not use derivative financial instruments for trading or speculative purposes. While certain of our derivative instruments are designated as hedging instruments, we also enter into derivative instruments that are designed to hedge a risk but are not designated as hedging instruments (referred to as an “economic hedge” or “non-designated hedge”). Changes in the fair value of these non-designated hedging instruments are recognized in each reporting period in the expense line item on our Condensed Consolidated Statements of Income that is consistent with the nature of the hedged risk. We are exposed to counterparty credit risk on all of our derivative financial instruments. We have established and maintain strict counterparty credit guidelines and enter into hedges only with financial institutions that are investment grade or better. We continuously monitor our counterparty credit risk and utilize numerous counterparties to minimize our exposure to potential defaults. We do not require collateral under these agreements.
The fair value of our derivative contracts (including forwards, options, cross-currency swaps, and interest rate swaps) is determined using standard valuation models. The significant inputs used in these models are readily available in public markets or can be derived from observable market transactions, and, therefore, our derivative contracts have been classified as Level 2. Inputs used in these standard valuation models include the applicable spot, forward, and discount rates that are current as of the valuation date. The standard valuation model for our option contracts also includes implied volatility, which is specific to individual options and is based on rates quoted from a widely used third-party resource. For more information regarding the valuation of our derivatives, refer to Note 17.
The following table summarizes the fair value of our assets and liabilities related to derivative financial instruments and the respective line items in which they were recorded on our Condensed Consolidated Balance Sheets as of the dates presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Instruments
|
|
Location – Balance Sheets
|
|
April 1,
2016
|
|
December 31,
2015
|
Assets:
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
Foreign currency contracts
(A)
|
|
Other current assets
|
|
$
|
29
|
|
|
$
|
20
|
|
Foreign currency contracts
|
|
Other noncurrent assets
|
|
28
|
|
|
17
|
|
Total
|
|
|
|
57
|
|
|
37
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
Foreign currency contracts
|
|
Other current assets
|
|
2
|
|
|
2
|
|
Commodity contracts
|
|
Other current assets
|
|
1
|
|
|
1
|
|
Foreign currency contracts
|
|
Other noncurrent assets
|
|
10
|
|
|
7
|
|
Total
|
|
|
|
13
|
|
|
10
|
|
Total Assets
|
|
|
|
$
|
70
|
|
|
$
|
47
|
|
Liabilities:
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Foreign currency contracts
(A)
|
|
Accounts payable and accrued expenses
|
|
$
|
98
|
|
|
$
|
28
|
|
Foreign currency contracts
|
|
Other noncurrent liabilities
|
|
—
|
|
|
2
|
|
Total
|
|
|
|
98
|
|
|
30
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
Commodity contracts
|
|
Accounts payable and accrued expenses
|
|
22
|
|
|
24
|
|
Foreign currency contracts
|
|
Other noncurrent liabilities
|
|
10
|
|
|
7
|
|
Commodity contracts
|
|
Other noncurrent liabilities
|
|
13
|
|
|
14
|
|
Total
|
|
|
|
45
|
|
|
45
|
|
Total Liabilities
|
|
|
|
$
|
143
|
|
|
$
|
75
|
|
___________________________
|
|
(A)
|
Amounts include the gross interest receivable or payable on our cross-currency swap agreements.
|
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
Cash Flow Hedges
We use cash flow hedges to mitigate our exposure to changes in cash flows attributable to currency fluctuations associated with certain forecasted transactions, including purchases of raw materials and services denominated in non-functional currencies, the receipt of interest and principal on intercompany loans denominated in non-functional currencies, and the payment of interest and principal on debt issuances in a non-functional currency. Effective changes in the fair value of these cash flow hedging instruments are recognized in accumulated other comprehensive income (loss) (AOCI) on our Condensed Consolidated Balance Sheets. The effective changes are then recognized in the period that the forecasted purchases or payments impact earnings in the expense line item on our Condensed Consolidated Statements of Income that is consistent with the nature of the underlying hedged item. Any changes in the fair value of these cash flow hedges that are the result of ineffectiveness are recognized immediately in the expense line item on our Condensed Consolidated Statements of Income that is consistent with the nature of the underlying hedged item.
The following table summarizes our outstanding cash flow hedges as of the dates presented (all contracts denominated in a foreign currency have been converted into U.S. dollars using the period end spot rate):
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2016
|
|
December 31, 2015
|
Type
|
|
Notional Amount
|
|
Latest Maturity
|
|
Notional Amount
|
|
Latest Maturity
|
Foreign currency contracts
|
|
USD 709 million
|
|
June 2021
|
|
USD 700 million
|
|
June 2021
|
The following tables summarize the effect of our derivative financial instruments, net of tax, designated as cash flow hedges on our AOCI and Condensed Consolidated Statements of Income for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized in AOCI on
Derivative Instruments
(A)
|
|
|
First Quarter
|
Cash Flow Hedging Instruments
|
|
2016
|
|
2015
|
Foreign currency contracts
|
|
$
|
25
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Reclassified from
AOCI into Earnings
(B)
|
|
|
|
|
First Quarter
|
Cash Flow Hedging Instruments
|
|
Location - Statements of Income
|
|
2016
|
|
2015
|
Foreign currency contracts
|
|
Cost of sales
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
Foreign currency contracts
(C)
|
|
Other nonoperating expense
|
|
13
|
|
|
13
|
|
Total
|
|
|
|
$
|
13
|
|
|
$
|
8
|
|
___________________________
|
|
(A)
|
The amount of ineffectiveness associated with these hedging instruments was not material.
|
|
|
(B)
|
Over the next 12 months, deferred
gains
totaling
$4 million
are expected to be reclassified from AOCI as the forecasted transactions occur. The amounts will be recorded on our Condensed Consolidated Statements of Income in the expense line item that is consistent with the nature of the underlying hedged item.
|
|
|
(C)
|
The
gain (loss)
recognized on these currency contracts is offset by the
gain (loss)
recognized on the remeasurement of the underlying debt instruments; therefore, there is a minimal consolidated net effect in other nonoperating (expense) income on our Condensed Consolidated Statements of Income.
|
Economic (Non-designated) Hedges
We periodically enter into derivative instruments that are designed to hedge various risks but are not designated as hedging instruments. These hedged risks include those related to commodity price fluctuations associated with forecasted purchases of aluminum, sugar, components of PET (plastic), and vehicle fuel. At times, we also enter into other short-term non-designated hedges to mitigate our exposure to changes in cash flows attributable to currency fluctuations associated with short-term intercompany loans and certain cash equivalents denominated in non-functional currencies.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
The following table summarizes our outstanding economic hedges as of the dates presented (all contracts denominated in a foreign currency have been converted into U.S. dollars using the period end spot rate):
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2016
|
|
December 31, 2015
|
Type
|
|
Notional Amount
|
|
Latest Maturity
|
|
Notional Amount
|
|
Latest Maturity
|
Foreign currency contracts
|
|
USD 168 million
|
|
April 2016
|
|
USD 210 million
|
|
March 2016
|
Commodity contracts
|
|
USD 119 million
|
|
December 2020
|
|
USD 137 million
|
|
December 2020
|
Changes in the fair value of outstanding economic hedges are recognized each reporting period in the expense line item on our Condensed Consolidated Statements of Income that is consistent with the nature of the hedged risk.
The following table summarizes the gains (losses) recognized from our non-designated derivative financial instruments on our Condensed Consolidated Statements of Income for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
Non-Designated Hedging Instruments
|
|
Location - Statements of Income
|
|
2016
|
|
2015
|
Commodity contracts
|
|
Cost of sales
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
Commodity contracts
|
|
Selling, delivery, and administrative expenses
|
|
(3
|
)
|
|
—
|
|
Foreign currency contracts
|
|
Other nonoperating expense
(A)
|
|
22
|
|
|
14
|
|
Total
|
|
|
|
$
|
18
|
|
|
$
|
15
|
|
___________________________
|
|
(A)
|
The
gain (loss)
recognized on these currency contracts is offset by the
gain (loss)
recognized on the remeasurement of the underlying hedged items; therefore, there is a minimal consolidated net effect in other nonoperating (expense) income on our Condensed Consolidated Statements of Income.
|
Mark-to-market gains/losses related to our non-designated commodity hedges are recognized in the earnings of our Corporate segment until such time as the underlying hedged transaction affects the earnings of our Europe operating segment. In the period the underlying hedged transaction occurs, the accumulated mark-to-market gains/losses related to the hedged transaction are reclassified from the earnings of our Corporate segment into the earnings of our Europe operating segment. This treatment allows our Europe operating segment to reflect the true economic effects of the underlying hedged transaction in the period the hedged transaction occurs without experiencing the mark-to-market volatility associated with these non-designated commodity hedges.
As of
April 1, 2016
, our Corporate segment earnings included net mark-to-market
losses
on non-designated commodity hedges totaling
$35 million
. These amounts will be reclassified into the earnings of our Europe operating segment when the underlying hedged transactions occur. For additional information about our segment reporting, refer to Note 13.
The following table summarizes the deferred gain (loss) activity in our Corporate segment during the period presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses) Deferred at Corporate Segment
(A)
|
|
Cost of Sales
|
|
SD&A
|
|
Total
|
Balance at December 31, 2015
|
|
$
|
(18
|
)
|
|
$
|
(20
|
)
|
|
$
|
(38
|
)
|
Amounts recognized during the period and recorded in our Corporate segment, net
|
|
(1
|
)
|
|
(3
|
)
|
|
(4
|
)
|
Amounts transferred from our Corporate segment to our Europe operating segment, net
|
|
3
|
|
|
4
|
|
|
7
|
|
Balance at April 1, 2016
|
|
$
|
(16
|
)
|
|
$
|
(19
|
)
|
|
$
|
(35
|
)
|
___________________________
|
|
(A)
|
Over the next 12 months, deferred
losses
totaling
$23 million
are expected to be reclassified from our Corporate segment earnings into the earnings of our Europe operating segment as the underlying hedged transactions occur.
|
Net Investment Hedges
We have entered into currency forwards, options, and foreign currency denominated borrowings designated as net investment hedges of our foreign subsidiaries. Changes in the fair value of these hedges resulting from currency exchange rate changes are recognized in AOCI on our Condensed Consolidated Balance Sheets to offset the change in the carrying value of the net investment being hedged. Any changes in the fair value of these hedges that are the result of ineffectiveness are recognized immediately in other nonoperating (expense) income on our Condensed Consolidated Statements of Income.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
The following table summarizes our outstanding instruments designated as net investment hedges as of the dates presented:
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2016
|
|
December 31, 2015
|
Type
|
|
Notional Amount
|
|
Latest Maturity
|
|
Notional Amount
|
|
Latest Maturity
|
Foreign currency contracts
|
|
USD 1.7 billion
|
|
August 2016
|
|
USD 1.7 billion
|
|
August 2016
|
Foreign currency denominated debt
|
|
USD 2.1 billion
|
|
March 2030
|
|
USD 2.0 billion
|
|
March 2030
|
The following table summarizes the effect of our derivative financial instruments, net of tax, designated as net investment hedges on our AOCI for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized in AOCI on
Derivative Instruments
(A)
|
|
|
First Quarter
|
Net Investment Hedging Instruments
|
|
2016
|
|
2015
|
Foreign currency contracts
|
|
$
|
(54
|
)
|
|
$
|
17
|
|
Foreign currency denominated debt
|
|
(67
|
)
|
|
82
|
|
Total
|
|
$
|
(121
|
)
|
|
$
|
99
|
|
___________________________
|
|
(A)
|
The amount of ineffectiveness associated with these hedging instruments was not material.
|
NOTE 8—DEBT
The following table summarizes our debt as of the dates presented (in millions, except rates):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2016
|
|
December 31, 2015
|
|
Principal
Balance
|
|
Rates
(A)
|
|
Principal Balance
(D)
|
|
Rates
(A)
|
U.S. dollar commercial paper
|
$
|
320
|
|
|
0.6
|
%
|
|
$
|
198
|
|
|
0.6
|
%
|
U.S. dollar notes due 2016-2021
|
1,316
|
|
|
3.4
|
|
|
1,316
|
|
|
3.4
|
|
Euro notes due 2017-2030
|
2,439
|
|
|
2.4
|
|
|
2,315
|
|
|
2.4
|
|
Capital lease obligations
(B)
|
20
|
|
|
n/a
|
|
|
17
|
|
|
n/a
|
|
Total debt
(C)
|
4,095
|
|
|
|
|
3,846
|
|
|
|
Current portion of debt
|
(577
|
)
|
|
|
|
(454
|
)
|
|
|
Debt, less current portion
|
$
|
3,518
|
|
|
|
|
$
|
3,392
|
|
|
|
___________________________
|
|
(A)
|
These rates represent the weighted average interest rates or effective interest rates on the balances outstanding, as adjusted for the effects of interest rate swap agreements, if applicable.
|
|
|
(B)
|
These amounts represent the present value of our minimum capital lease payments.
|
|
|
(C)
|
The total fair value of our outstanding debt, excluding capital lease obligations, was
$4.3 billion
and
$3.9 billion
at
April 1, 2016
and
December 31, 2015
, respectively. The fair value of our debt is determined using quoted market prices for publicly traded instruments (Level 1).
|
|
|
(D)
|
The adoption of ASU 2015-03 on January 1, 2016 resulted in the reclassification unamortized debt issuance costs of
$3 million
of the principal balance of our U.S. dollar notes and
$12 million
of the principal balance of our Euro notes from other noncurrent assets to debt, less current portion as of December 31, 2015. For more information on the adoption of this standard, refer to Note 1.
|
Credit Facilities
We have amounts available to us for borrowing under a
$1 billion
multi-currency credit facility with a syndicate of
eight
banks. This credit facility matures in
2017
and is for general corporate purposes, including serving as a backstop to our commercial paper program and supporting our working capital needs. At
April 1, 2016
, our availability under this credit facility was
$1 billion
. Based on information currently available to us, we have no indication that the financial institutions syndicated under this facility would be unable to fulfill their commitments to us as of the date of the filing of this report.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
Covenants
Our credit facility and outstanding notes contain various provisions that, among other things, require us to limit the incurrence of certain liens or encumbrances in excess of defined amounts. Additionally, our credit facility requires that we meet a minimum interest coverage ratio. We were in compliance with these requirements as of
April 1, 2016
. These requirements currently are not, nor is it anticipated that they will become, restrictive to our liquidity or capital resources.
NOTE 9—COMMITMENTS AND CONTINGENCIES
Legal Contingencies
In connection with the agreements entered into between us, TCCC, CCIP, and CCEG on August 6, 2015,
three
putative class action lawsuits were filed in Delaware Chancery Court between the announcement date and the present. The lawsuits are similar and assert claims on behalf of our shareholders for various alleged breaches of fiduciary duty in connection with the Merger. The lawsuits name us, our Board of Directors, CCIP, CCEG, CCEP, and TCCC as defendants. Plaintiffs in each case seek to enjoin the transaction, to rescind the Merger if it is consummated and allow termination damages, and to recover other damages, attorneys’ fees, and litigation expenses. By consent order dated January 7, 2016, the court consolidated these cases. On March 2, 2016, the plaintiffs filed a consolidated amended class action complaint, making similar allegations regarding the Merger and adding allegations that the registration statement on Form F-4 and amendment No. 1 thereto, filed with the SEC on December 15, 2015 and January 28, 2016, and as declared effective on April 11, 2016 contain misstatements and omissions in their disclosures regarding the Merger. The defendants have moved to dismiss the consolidated amended class action complaint. We believe this matter to be without merit and intend to defend it vigorously. For additional information about the Merger between us, TCCC, CCIP, and CCEG, refer to Note 2.
Tax Audits
Our tax filings are subjected to audit by tax authorities in most jurisdictions in which we do business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. We believe that we have adequately provided for any assessments that could result from those proceedings where it is more likely than not that we will pay some amount.
Indemnifications
In the normal course of business, we enter into agreements that provide general indemnifications. We have not made significant indemnification payments under such agreements in the past, and we believe the likelihood of incurring such a payment obligation in the future is remote. Furthermore, we cannot reasonably estimate future potential payment obligations because we cannot predict when and under what circumstances they may be incurred. As a result, we have not recorded a liability in our Condensed Consolidated Financial Statements with respect to these general indemnifications.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
NOTE 10—EMPLOYEE BENEFIT PLANS
Pension Plans
We sponsor a number of defined benefit pension plans. The following table summarizes the net periodic benefit costs of our pension plans for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
2016
|
|
2015
|
Components of net periodic benefit costs:
|
|
|
|
Service cost
|
$
|
13
|
|
|
$
|
14
|
|
Interest cost
|
14
|
|
|
13
|
|
Expected return on plan assets
|
(24
|
)
|
|
(24
|
)
|
Amortization of net prior service cost
|
1
|
|
|
—
|
|
Amortization of actuarial loss
|
6
|
|
|
7
|
|
Total costs
|
$
|
10
|
|
|
$
|
10
|
|
Contributions
Contributions to our pension plans totaled
$13 million
and
$15 million
during the first
quarter
of
2016
and
2015
, respectively. The following table summarizes our projected contributions for the full year ending
December 31, 2016
, as well as actual contributions for the year ended
December 31, 2015
(in millions):
|
|
|
|
|
|
|
|
|
|
Projected
(A)
2016
|
|
Actual
(A)
2015
|
Total pension contributions
|
$
|
51
|
|
|
$
|
52
|
|
___________________________
|
|
(A)
|
These amounts represent only contributions made by CCE.
|
NOTE 11—TAXES
Our effective tax rate was approximately
26 percent
and
27 percent
for the first
quarter
of
2016
and
2015
, respectively. The following table provides a reconciliation of our income tax expense at the statutory U.S. federal rate to our actual income tax expense for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
2016
|
|
2015
|
U.S. federal statutory expense
|
$
|
32
|
|
|
$
|
46
|
|
Taxation of foreign operations, net
(A)
|
(20
|
)
|
|
(26
|
)
|
U.S. taxation of foreign earnings, net of tax credits
|
11
|
|
|
12
|
|
Nondeductible items
|
1
|
|
|
2
|
|
Total provision for income taxes
|
$
|
24
|
|
|
$
|
34
|
|
___________________________
|
|
(A)
|
Our effective tax rate reflects the benefit, net of income tax contingencies, of having all of our operations outside the U.S., all of which are taxed at statutory rates lower than the statutory U.S. rate of
35 percent
, with the benefit of some income being fully or partially exempt from income taxes due to various operating and financing activities.
|
Repatriation of Current Year Foreign Earnings to the U.S.
During the second half of
2016
, we expect to repatriate to the U.S. a portion of our
2016
foreign earnings to satisfy our
2016
U.S.-based cash flow needs. The amount to be repatriated to the U.S. will depend on, among other things, our actual
2016
foreign earnings and our actual
2016
U.S.-based cash flow needs. Our historical foreign earnings will continue to remain indefinitely reinvested, and, if we do not generate sufficient current year foreign earnings to repatriate to the U.S. in any future given year, we expect to have adequate access to capital in the U.S. to allow us to satisfy our U.S.-based cash flow needs in that year. Therefore, historical foreign earnings and future foreign earnings that are not repatriated to the U.S. will remain indefinitely reinvested and will be used to service our foreign operations, non-U.S. debt, and to fund future acquisitions. For additional information about our undistributed foreign earnings, refer to Note 11 of the Notes to Consolidated Financial Statements in our Form 10-K.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
NOTE 12—EARNINGS PER SHARE
We calculate our basic earnings per share by dividing net income by the weighted average number of shares and participating securities outstanding during the period. Our diluted earnings per share are calculated in a similar manner, but include the effect of dilutive securities. To the extent these securities are antidilutive, they are excluded from the calculation of diluted earnings per share.
The following table summarizes our basic and diluted earnings per share calculations for the periods presented (in millions, except per share data; per share data is calculated prior to rounding):
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
2016
|
|
2015
|
Net income
|
$
|
66
|
|
|
$
|
96
|
|
Basic weighted average shares outstanding
|
228
|
|
|
235
|
|
Effect of dilutive securities
(A)
|
4
|
|
|
5
|
|
Diluted weighted average shares outstanding
|
232
|
|
|
240
|
|
Basic earnings per share
|
$
|
0.29
|
|
|
$
|
0.41
|
|
Diluted earnings per share
|
$
|
0.29
|
|
|
$
|
0.40
|
|
___________________________
|
|
(A)
|
Options to purchase
7.5 million
and
7.9 million
shares were outstanding at
April 1, 2016
and
April 3, 2015
, respectively. During the first
quarter
of
2016
and
2015
, options to purchase
0.9 million
and
1.0 million
shares, respectively, were not included in the computation of diluted earnings per share because the effect of including these options in the computation would have been antidilutive. The dilutive impact of the remaining options outstanding in each period was included in the effect of dilutive securities.
|
We did not repurchase any shares in the first
quarter
of
2016
and do not intend to repurchase additional outstanding shares prior to the closing of the Merger (expected to be during the second
quarter
of
2016
). During the first
quarter
of
2015
, we repurchased
6.9 million
shares under our share repurchase program. Refer to Note 16.
During the first
quarter
of
2016
, we issued an aggregate of
0.6 million
shares of common stock in connection with the exercise of share options with a total intrinsic value of
$20 million
.
Dividend payments on our common stock totaled
$68 million
and
$65 million
during the first
quarter
of
2016
and
2015
, respectively. In February
2016
, our Board of Directors approved a
$0.02
per share increase in our quarterly dividend from
$0.28
per share to
$0.30
per share beginning in the first quarter of
2016
.
NOTE 13—OPERATING SEGMENT
We operate in one industry and have
one
operating segment (our Europe operating segment). This segment derives its revenues from marketing, producing, and distributing nonalcoholic beverages.
No
single customer accounted for more than
10 percent
of our net sales during the first
quarter
of
2016
or
2015
.
Our segment operating income includes the segment’s revenue less substantially all the segment’s cost of production, distribution, and administration. We evaluate the segment’s performance based on several factors, of which net sales and operating income are the primary financial measures.
Mark-to-market gains (losses) related to our non-designated commodity hedges are recognized in the earnings of our Corporate segment until such time as the underlying hedged transaction affects the earnings of our Europe operating segment. In the period the underlying hedged transaction occurs, the accumulated mark-to-market gains (losses) related to the hedged transaction are reclassified from the earnings of our Corporate segment into the earnings of our Europe operating segment. This treatment allows our Europe operating segment to reflect the true economic effects of the underlying hedged transaction in the period the hedged transaction occurs without experiencing the mark-to-market volatility associated with these non-designated commodity hedges. For additional information about our non-designated hedges, refer to Note 7.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
The following table summarizes selected segment financial information for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
Corporate
|
|
Consolidated
|
First Quarter 2016:
|
|
|
|
|
|
Net sales
(A)
|
$
|
1,517
|
|
|
$
|
—
|
|
|
$
|
1,517
|
|
Operating income (loss)
(B)(C)
|
162
|
|
|
(40
|
)
|
|
122
|
|
First Quarter 2015:
|
|
|
|
|
|
Net sales
(A)
|
$
|
1,631
|
|
|
$
|
—
|
|
|
$
|
1,631
|
|
Operating income (loss)
(B)
|
190
|
|
|
(32
|
)
|
|
158
|
|
___________________________
|
|
(A)
|
The following table summarizes the contribution of total net sales by country as a percentage of total net sales for the periods presented:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
2016
|
|
2015
|
Net sales:
|
|
|
|
Great Britain
|
34
|
%
|
|
35
|
%
|
France
|
31
|
|
|
30
|
|
Belgium
|
15
|
|
|
15
|
|
The Netherlands
|
8
|
|
|
8
|
|
Norway
|
6
|
|
|
7
|
|
Sweden
|
6
|
|
|
5
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
|
(B)
|
Our Corporate segment earnings include net mark-to-market
gains
on our non-designated commodity hedges totaling
$3 million
for the first
quarter
of
2016
and net mark-to-market
gains
of
$2 million
for the first
quarter
of
2015
. As of
April 1, 2016
, our Corporate segment earnings included net mark-to-market
losses
on non-designated commodity hedges totaling
$35 million
. These amounts will be reclassified into the earnings of our Europe operating segment when the underlying hedged transactions occur. For additional information about our non-designated hedges, refer to Note 7.
|
|
|
(C)
|
For the
first
quarter
of
2016
, operating income in our Corporate and Europe segments included Merger related expenses totaling
$11 million
and
$1 million
, respectively. For additional information about the Merger, refer to Note 2.
|
NOTE 14—RESTRUCTURING ACTIVITIES
The following table summarizes our restructuring costs for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
2016
|
|
2015
|
Europe
(A)
|
$
|
31
|
|
|
$
|
9
|
|
Corporate
|
—
|
|
|
—
|
|
Total
|
$
|
31
|
|
|
$
|
9
|
|
___________________________
|
|
(A)
|
During the first
quarter
of
2016
, we incurred
$31 million
of restructuring costs under our Belgium supply chain optimization project. During the
first
quarter of
2015
, we incurred
$9 million
related to other restructuring activities.
|
Belgium Supply Chain Optimization Project
In the fourth quarter of 2015, we announced the relocation and restructuring of certain production operations in Belgium designed to optimize the efficiency and effectiveness of our supply chain. We expect to be substantially complete with this program by the end of 2016 and anticipate nonrecurring restructuring charges of approximately
$55 million
, primarily comprised of severance costs and accelerated depreciation. During the first
quarter
of
2016
, we recorded nonrecurring restructuring charges under this program totaling
$31 million
. As of April 1, 2016, we had incurred
$37 million
in cumulative expenses related to the project. Substantially all nonrecurring restructuring charges related to this program are included in SD&A on our Condensed Consolidated Statements of Income.
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
The following table summarizes these restructuring charges for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Pay
and Benefits
|
|
Accelerated
Depreciation
(B)
|
|
Other
|
|
Total
|
Balance at January 1, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Provision
|
29
|
|
|
2
|
|
|
—
|
|
|
31
|
|
Cash payments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Noncash items
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
Balance at April 1, 2016
(A)
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29
|
|
___________________________
|
|
(A)
|
Substantially all of the amounts are included in accounts payable and accrued expenses on our Condensed Consolidated Balance Sheets.
|
|
|
(B)
|
Accelerated depreciation represents the difference between the depreciation expense of the asset using the original useful life and the depreciation expense of the asset under the reduced useful life due to the restructuring activity.
|
NOTE 15—ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
AOCI is comprised of net income and other adjustments, including foreign currency translation adjustments, hedges of our net investments in our foreign subsidiaries, changes in the fair value of certain derivative financial instruments qualifying as cash flow hedges, and pension plan adjustments. We do not provide income taxes on currency translation adjustments (CTA), as the historical earnings from our foreign subsidiaries are considered to be indefinitely reinvested. If current year earnings are repatriated, the amount to be repatriated is determined in U.S. dollars and converted to the equivalent amount of foreign currency at the time of repatriation; therefore, the repatriation of current year earnings does not have an impact on the CTA component of our AOCI balance.
The following table summarizes the change in the components of our AOCI balance for the periods presented (in millions; all amounts are presented net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Translations
|
|
Net Investment Hedges
|
|
Cash Flow Hedges
(A)
|
|
Pension Plan Adjustments
(B)
|
|
Total
|
Balance at January 1, 2015
|
|
$
|
(441
|
)
|
|
$
|
112
|
|
|
$
|
(18
|
)
|
|
$
|
(367
|
)
|
|
$
|
(714
|
)
|
Other comprehensive (loss) income before reclassifications
|
|
(337
|
)
|
|
106
|
|
|
(11
|
)
|
|
(85
|
)
|
|
(327
|
)
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
22
|
|
|
22
|
|
|
44
|
|
Net change in other comprehensive (loss) income
|
|
(337
|
)
|
|
106
|
|
|
11
|
|
|
(63
|
)
|
|
(283
|
)
|
Balance at December 31, 2015
|
|
(778
|
)
|
|
218
|
|
|
(7
|
)
|
|
(430
|
)
|
|
(997
|
)
|
Other comprehensive (loss) income before reclassifications
|
|
64
|
|
|
(121
|
)
|
|
25
|
|
|
—
|
|
|
(32
|
)
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
6
|
|
|
(7
|
)
|
Net change in other comprehensive (loss) income
|
|
64
|
|
|
(121
|
)
|
|
12
|
|
|
6
|
|
|
(39
|
)
|
Balance at April 1, 2016
|
|
$
|
(714
|
)
|
|
$
|
97
|
|
|
$
|
5
|
|
|
$
|
(424
|
)
|
|
$
|
(1,036
|
)
|
___________________________
|
|
(A)
|
For additional information about our cash flow hedges, refer to Note 7.
|
|
|
(B)
|
For additional information about our pension plans, refer to Note 10.
|
NOTE 16—SHARE REPURCHASE PROGRAM
Beginning in October 2010, our Board of Directors approved a series of resolutions authorizing the repurchase of shares of our stock. Since 2010, we have repurchased
$4.3 billion
in outstanding shares, representing
125.9 million
shares, under these resolutions. In December 2014, our Board of Directors approved a resolution to authorize additional share repurchases for an aggregate price of not more than
$1.0 billion
. We currently have
$969 million
in authorized share repurchases remaining under the December 2014 resolution. We did not repurchase any shares in the first
quarter
of
2016
and do not intend to repurchase additional outstanding shares prior to the closing of the Merger (expected to be during the second
quarter
of
2016
).
We can repurchase shares in the open market and in privately negotiated transactions. Repurchased shares are added to treasury stock and are available for general corporate purposes, including acquisition financing and the funding of various employee benefit and compensation plans. In addition to market conditions, we consider alternative uses of cash and/or debt, balance sheet ratios,
COCA-COLA ENTERPRISES, INC.
Notes to Condensed Consolidated Financial Statements
and shareowner returns when evaluating share repurchases. For additional information about our share repurchase program, refer to Note 16 of the Notes to Consolidated Financial Statements in our Form 10-K.
The following table summarizes the share repurchase activity for the periods presented (in millions, except per share data):
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
2016
|
|
2015
|
Number of shares repurchased
|
—
|
|
|
6.9
|
|
Weighted average purchase price per share
|
$
|
—
|
|
|
$
|
43.69
|
|
Amount of share repurchases
(A)
|
$
|
—
|
|
|
$
|
300
|
|
___________________________
|
|
(A)
|
Total cash paid in the first
quarter
of
2015
for share repurchases totaled
$313 million
due to the timing of settlement.
|
NOTE 17—FAIR VALUE MEASUREMENTS
The following tables summarize our non-pension financial assets and liabilities recorded at fair value on a recurring basis (at least annually) as of the dates presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2016
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
Derivative assets
(A)
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
70
|
|
|
$
|
—
|
|
Derivative liabilities
(A)
|
$
|
143
|
|
|
$
|
—
|
|
|
$
|
143
|
|
|
$
|
—
|
|
|
December 31, 2015
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
Derivative assets
(A)
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
47
|
|
|
$
|
—
|
|
Derivative liabilities
(A)
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
—
|
|
___________________________
|
|
(A)
|
We are required to report our derivative instruments at fair value. We calculate our derivative asset and liability values using a variety of valuation techniques, depending on the specific characteristics of the hedging instrument, taking into account credit risk. The fair value of our derivative contracts (including forwards, options, cross-currency swaps, and interest rate swaps) is determined using standard valuation models. The significant inputs used in these models are readily available in public markets or can be derived from observable market transactions and, therefore, our derivative contracts have been classified as Level 2. Inputs used in these standard valuation models include the applicable spot, forward, and discount rates which are current as of the valuation date. The standard valuation model for our option contracts also includes implied volatility which is specific to individual options and is based on rates quoted from a widely used third-party resource.
|
COCA-COLA ENTERPRISES, INC.