The Coca-Cola Company Annual Report 1980

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CONTENTS1 Financial Highlights3 Letter to Stockholders5 The Austin Years7 Soft Drink Operations

15 Foods Division21 The Wine Spectrum24 Aqua-Chem, Inc.25 Financial Information45 Directors and Officers48 Other Information

The Coca-Cola Company is the world leader in production and distribution ofsyrups and concentrates for soft drinks. More than 35 percent of all soft drinks con-sumed worldwide in 1980 were Company products, sold through about 1,500 bottlersand 3,600 fountain wholesalers in over 135 countries.

As the largest segment of the Company's business, soft drink products in 1980generated 76 percent of net sales and 85 percent of operating income. The productCoca-Cola accounts for about 70 percent of the Company's soft drink sales volume.Other leading products in the Company's worldwide soft drink line include Sprite,TAB, Fanta Orange, Fresca, Hi-C, Leed, Lift, and Gappy. Sales outside the UnitedStates of these and many other soft drinks, including Coca-Cola, now represent 63percent of the Company's total soft drink unit sales volume.

The Coca-Cola Company Foods Division, the world's largest citrus processor,produces and markets the well-known Minute Maid brand of frozen concentrate andchilled juices, Maryland Club and Butter-Nut coffee and tea, and Hi-C fruit drinksand powdered drink mixes. Other Company subsidiaries produce disposable plasticbags, wrap, cutlery and straws, and bottled water.

The Wine Spectrum, now the fourth largest wine producing and marketing organ-ization in the United States, encompasses The Taylor Wine Company, Inc. (and itsGreat Western brand), Sterling Vineyards and The Monterey Vineyard,

Another subsidiary is Aqua-Chem, Inc., producer of steam generators, industrialboilers and water treatment equipment for many applications.

About 19,500 people are employed by the Company in the United States andabout 21,500 overseas, the majority of whom are native to the countries in whichthey work. Common stock in The Coca-Cola Company, exceeding 123 million shares, istraded on the New York Stock Exchange and owned by almost 80,000 stockholders.

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: 80310 North Avenue NW, Atlanta. Georgia 30313 404/898-2121Mailing Address: P.O. Drawer 1734. Atlanta, Georgia 30301

Financial Highlights (In millions except per share data)The Coca-Cola Company and Subsidiaries

YEAR ENDED DECEMBER 31,Net salesOperating incomeIncome before income taxesNet incomeNet income per shareDividends per shareStockholders' equity at year-end% Net income to net sales% Net income to average stockholders' equity

1980$5,912.6S 768.3$ 764.3$ 422.1$ 3.42$ 2.16$2,074.7

7.1%

21.1%

1979

$4,961.4$ 719.4$ 742.2$ 420.1$ 3.40$ 1.96$1,918.7

8.5%23.0%

% Change19.2%

6.8%3.0%

.5%

.6%10.2%8.1%

Net Sales (Minions) Net Income Per Share Dividends Per Share$5,913

$4,961

$4,338

S3.40$2.16

'71 '72 73 '74 75 '76 77 78 79 '80 71 72 73 74 '75 76 77 78 79 80 71 '72 73 74 75 76 77 78 79 '80

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To Our Stockholders

Top:Roberto C. Goizueia.Chairman. Board ofDirectors, and ChiefExecutive Officer.

Left :Donald R. Keough.President and ChiefOperating Officer.Right:John K. Callings. Jr..Vice Chairman.Chief Financial Officerand Treasurer.

The Coca-Cola Company recorded astrong increase in net sales in 1980. Netincome, however, was only slightly above1979 levels, largely due to a 16 percent profitdecline in the third quarter. The third quarterdecline resulted from disappointing foreignsoft drink sales caused by a combination ofeconomic and weather-related problems. Weare pleased to report, however, that fourthquarter operating income increased 27 per-cent, and net income rose 8 percent, based onrenewed foreign unit sales growth and contin-ued growth in U.S. soft drink and non-softdrink lines. We expect these more favorabletrends to continue into 1981.

Net sales for 1980 increased 19 percent to$5.91 billion from $4.96 billion a year ago.However, the costs of producing and marketingproducts and administrative and general ex-penses grew at even faster rates, resulting inan operating income gain of 7 percent over1979. The Company's interest expense andeffective income tax rate in 1980 were signifi-cantly higher than in 1979; these effects, to-gether with the relatively moderate increasein operating income, combined to limit netincome to $422 million or $3.42 per share,compared to $420 million or $3.40 per sharein 1979.

In 1980, operating income of the Company'sdomestic operations increased 9 percent, in-cluding increases from both soft drink andnon-soft drink operations. Operating incomefrom the Company's foreign operations in-creased 8 percent in 1980.

Soft Drink Sales, Income Up

Combined net sales of the Company's softdrink products worldwide increased 20 per-cent in 1980, and operating income rose 7percent over the prior year.

Unit sales volume at retail of the Com-pany's soft drink operations in the United Stateswas up 4 percent compared to 1979. However,due to December 1979 bottler and fountainwholesaler inventory buildups in anticipationof January 1980 price increases, unit shipmentsof syrups and concentrates were up only slightlymore than 2 percent. Sales of Company prod-ucts at retail continue to grow faster than thesoft drink industry in both the take-home andaway-from-home segments of the market. In1981, the Company expects a continued goodperformance from its United States softdrink operations.

Foreign soft drink unit sales volume was up

4 percent in 1980, following gains of 10 percentor more in both 1978 and 1979. The 1980 gainwas reduced by a combination of economicand weather-related events in key foreignmarkets, particularly in the third quarterwhen foreign unit sales declined 5 percent.Among the Company's largest foreign mar-kets, Argentina, Brazil and Africa reportedsizable gains for the year. Sales in Germany,Canada and Spain were slightly ahead of 1979levels. Unit sales in Mexico were up moder-ately for the full year and would have beensignificantly higher if not for the effects on softdrink sales of a system-wide price increase.Unit sales in Japan were down more than 10percent for the year, resulting from a recordrainy summer and economic softness whichhave hurt the soft d r ink indust ry in thatcountry. In 1981, the Company expects totalforeign uni t sales gains to be s ign i f i can t lygreater than in 1980. The Company expectsmoderate to strong unit gains from each of itsmajor operations, including Mexico and Japan.

Non-Soft Drink Growth Continues

Total sales from the Company's non-softdrink operations increased 16 percent in 1980,and operating income rose 20 percent over1979.

The Foods Division in 1980 recorded an-other fine year, achieving significant increasesin both sales and earnings. Full-year unit salesvolume of the Company's frozen and chilledcitrus products increased 15 percent and 35percent, respectively. Coffee unit volume wasdown as part of an overall industry decline.

The Wine Spectrum's aggressive marketingin the premium table wine segment of the in-dustry continued to bring good results in 1980.Unit sales volume rose by almost 40 percentover 1979. More importantly, however, TheWine Spectrum showed an increase in profitsduring 1980 after three consecutive years ofdeclining profits resulting from heavy intro-ductory marketing investments.

Sales and income from plastic consumerproducts continued to show solid growth.Aqua-Chem sales and income were also wellabove 1979 levels.

In 1981, we anticipate good increases inconsolidated operating and net income, abovehistoric growth trends. Our expectation isbased on continued good performances fromU.S. soft drink and non-soft drink operations,plus the absence in 1981 of the foreign opera-ting problems and unfavorable tax and interest

comparisons which adversely affected the 1980net income gain.

Management Identifies Long-Range Goals

During the decade of the 1970s, sales andearnings of The Coca-Cola Company grew ata compound rate between 12 and 13 percent,an impressive record, although net earningsincreased only slightly in 1980. In recognitionof higher rates of inflation, the Company'sgoals during the decade of the 1980s will be toachieve unit growth rates greater than those ofthe markets in which we do business, earningsgrowth above historical trends and significantlyhigher than the rate of inflation, and increasedreturns on assets. Management f i rmly believesthat these goals are achievable based upon theu n d e r l y i n g s t rength of the Company's softdrink and non-soft drink operations.

With these goals in mind, we conducted anintensive global review of operating expensebudgets during 1980 to reinsure that our oper-ations are being run as efficiently as possible.We also are reexamining the way we manageour working capital requirements to provideadded funds for investment in the various areasof our business. Furthermore, we will be look-ing closer than ever before at the managementof productivitiesof assets and of people.

In July of 1980, President Carter signed intolaw the Soft Drink Interbrand CompetitionAct. This Act upholds the territorial provi-sions of the United States bottler contracts ofThe Coca-Cola Company and other soft drinkcompanies and fur ther strengthens the bottlersystem.

In November of 1980, the Company begansteps to purchase The Coca-Cola BottlingCompany of New York, Inc. (Coca-Cola NewYork), the largest U.S. bottler of Coca-Cola.Pending completion of definit ive financialarrangements, this operation will be resold toa new company owned by a combination ofthird party investors, the current managementof Coca-Cola New York and The Coca-ColaCompany. This transaction was undertakento assure the continued aggressive manage-ment of this bottling company.

In 1980, the Company recorded a high 21percent return on average stockholders' equity.The Company's cash and securities position atyear-end 1980 was S289 million, compared to$209 million at year-end 1979. The Company'stotal debt at December 31, 1980, was S228million, compared to $139 million at year-end 1979. Our $100 million note offering inJune of 1980 was consistent with our conserva-tive financial philosophy. The sharp decline in

interest rates gave us an opportunity to substi-tute an intermediate-term note for some of theCompany's short- term, p r i m a r i l y seasonal,borrowings at an a t t r a c t i v e interest rateof 9-7/8 percent. At year-end 1980, however.long-term debt, expressed as a percentage ofstockholders' equity, was only 6 percent.

Board Announces Elections

At its March 4, 1981, meeting, the Board ofDirectors elected Donald R. Keough president,chief operating officer and a director of theCompany and John K. Collings, Jr., vice chair-man of the Company and a director. Mr. Col-lings will continue to serve as chief f inancia lofficer. Charles W. Duncan, Jr., a formerpresident and director of the Company, waselected to the Board. Mr. Duncan had pre-viously served on the Board before enteringfour years of government service as U.S.Deputy Secretary of Defense and U.S. Secre-tary of Energy.

Previously president of The Coca-Cola Com-pany Foods Division and. later, Coca-Cola USA,Mr. Keough most recently has been seniorexecutive vice president with responsibilityfor all operating units and the Corporate Mar-keting Division.

Mr. Collings joined the Company as presi-dent of Aqua-Chem, Inc., when it was acquiredin 1970 and has served as executive vice presi-dent, treasurer and chief financial officersince 1979.

Dividend Increase Declared

In other Board action, the Directors in-creased the quarterly dividend from 54 centsper share to 58 cents per share, equivalent toa full-year dividend in 1981 of $2.32 per share,or a 7.4 percent increase over the 1980 divi-dend. This is the 19th consecutive year theDirectors have approved dividend increases.

New management looks forward to buildingupon the Company's record of growth estab-lished under Paul Austin's direction and isexcited about the opportunities in every marketand industry in which we operate.

Roberto C. GoizuetaChairman. Board of Directors,

and Chief Executive Officer

The Austin Years

/. Paul Austin retired as chairman of the Board and chief executive officerof The Coca-Cola Company on March I, 1981 bringing to a close a dis-tinguished career spanning more than three decades. Mr. Austin was electedpresident and a director of the Company in 1962. chief executive officerin 1966 and chairman of the Board in 1970. Although he will continue toserve the Company as a consultant, this tribute highlights the growth andsuccess The Coca-Cola Company enjoyed under his dedicated leadership.

His early and rapid advancement from a position in the LegalDepartment in 1949 to his election as a vice president of TheCoca-Cola Export Corporation four years later foretold thedramatic growth the Company would later achieve under PaulAustin.

In 1962, when Mr. Austin became president of the Company,sales were $567 million and earnings $47 million. He leaves as hislegacy a Company nearly 10 times that size. It took more than 80years for The Coca-Cola Company to achieve $1 billion in sales, amilestone surpassed in 1967. Under Mr. Austin's guidance, that fig-ure quintupled in just 12 years.

Under his direction, the Company continued its dedication tothe product Coca-Cola and broadened its product line to offer avariety of soft drink brands, fruit juices and drinks, coffee and tea,wines, water technology equipment, and plastic consumer products.The Coca-Cola Company Foods Division, established in 1967 fromthe Company's Minute Maid and Duncan Foods operations, is nowa billion-dollar business and the world leader in citrus processing.The Wine Spectrum, initiated in 1977, has surged to a prominentposition as the fourth largest U.S. wine producer.

Although the Company's premier product, Coca-Cola, was firstintroduced in foreign markets around the turn of the century, Mr.Austin spearheaded a highly successful effort continually andaggressively to expand the markets for Coke and other Companyproducts around the world. Two of his proudest achievements wereattained in 1979: the reentry of Coca-Cola into China, and the intro-duction of Fanta Orange soft drink in the Soviet Union (whereCoca-Cola presently is excluded by existing contracts). That yearalso marked the reintroduction of Coca-Cola into the Egyptianmarket after a 12-year absence.

During Mr. Austin's tenure, the Company strengthened its policyof good corporate citizenship and developed the technology to sup-port it. The creation and sponsorship of projects in nutrition, eco-nomic development, health, the environment, arts and culture, andmany other areas are outgrowths of this effort.

The Board of Directors, the officers and the employees of TheCoca-Cola Company join in saluting a great leader and friend,J. Paul Austin, and pay tribute to him and to the heights the Com-pany achieved during the Austin years.

Soft Drink Operations

Major soft drink productsof The Coca-Cola Companyinclude:

Coca-ColaSpriteTABMello YelloFrescoMr. PiBBRamblin' Roof BeerFantaHi-C soft drinks

T he Coca-Cola Company is the world'sleading producer and marketer of softdrinks, commanding more than a 35 per-cent share of the worldwide carbonated softdrink industry. Soft drinks continue as the pri-mary source of sales, profits and growth forthe Company.

Soft drinks in 1980 comprised 76 percent ofthe Company's total net sales and 85 percentof total operating income. Sales revenues fromsoft drinks increased 20 percent to $4.52 billionfrom $3.76 billion in 1979. Operating incomerose 7 percent to $732 million, up from $686million in 1979.

About 63 percent of combined soft drinkunit sales were in countries outside the UnitedStates and Puerto Rico. Coca-Cola, the Com-pany's premier product, accounted for about70 percent of the Company's global soft drinkvolume.

Altogether in 1980, the Company sold almost1.3 billion gallons of soft drink syrups and con-centrates worldwide, equal to about 135 bil-lion eight-ounce, finished beverages.

Soft d r ink operat ions of The Coca-ColaCompany were divided into four geographicgroups in 1980: Coca-Cola USA, the PacificGroup, Coca-Cola Lat in Amer ica , and theEurope and Africa Group.

Coca-Cola USA Earnings Up

Coca-Cola USA markets more than 35 per-cent of the Company's total soft drink volume,manufacturing soft drink syrups and concen-trates in 16 branch operations and distributingthem to over 500 franchised bottlers14 ofwhich are Company-owned as well as toover 3,600 fountain wholesalers. In turn, thesebottlers and wholesalers market and distributeCompany products to more than one millionretail locations and more than 200,000 foodservice outlets across the country.

The year 1980 was one of significant accom-plishment for the Coca-Cola USA division.Earnings increased over 1979 as a result ofmore efficient marketing and more effectivecost controls, placing the division in a strongerposition for future growth.

Unit sales of Coca-Cola USA products at re-tail were up 4 percent. Actual syrup shipmentsin 1980 increased slightly more than 2 percent,less than the un i t gain at re ta i l , becausebottlers and fountain wholesalers were build-ing their stocks of inventory late in 1979 in an-t i c ipa t i on of a January 1980 syrup priceincrease, at the expense of 1980 sales.

Company brands now account for more

than 35 percent of total U.S. soft drink con-sumption. In 1980, the Company's productscontinued to outsell the competition and setthe pace for market growth in all segments ofthe market, including food stores, coin vendingand fountain outlets. Particularly favorabletrends were established in the food store seg-ment of the industry, which accounts for about42 percent of all industry sales volume. Salesof Company products through fountain out-lets also climbed ahead of 1979 levels.

Legislation Strengthens Bottler System

A key event of the past year in the U.S. waspassage of the Soft Drink Interbrand Competi-tion Act. This Act recognizes the validity ofterritorial sales contracts as long as substantialand effective interbrand competition existswithin a territory. Challenged by the FederalTrade Commission in a suit pending since 1971,such contracts have been an integral part ofthe Company's relationships with its bottlers.The U.S. Court of Appeals now has set asidethe FTC's order barring exclusive bottlingterritories and has remanded the matter to theFTC for dismissal.

In carrying out its commitment to a strong,independent f ranchised bott ler system,Coca-Cola USA has increased its efforts tomaintain a close working relationship withits bottlers. The division sold its Baltimorebottling operation to its franchisee in Wash-ington, D.C., and Richmond, Virginia, tocomplete that bottler's natural marketing area.

To further enhance the natural marketingareas of Company-owned bottling operations,which account for about 15 percent of totalU.S. bottler gallonage, the Company has mademinor acquisitions in the California, Washing-ton, Oregon, Michigan, and Wisconsin opera-tions. The Company's new bottling plant inNeedham, Massachusetts, began operation in1980 as the largest soft drink bottling plantunder one roof in the Western Hemisphere.

Corn Sweetener Authorized

In 1980, Coca-Cola USA authorized bottlerproduction of syrup for Coca-Cola from con-centrate and led the industry by authorizationof 50 percent use of high fructose corn syrup55 (HFCS-55), another form of sugar, in theCompany's pr incipal product , Coca-Cola.Coca-Cola containing 50 percent HFCS-55 isof the same quality, stability and taste asproduct containing 100 percent of the author-ized cane or beet sugar sweetener.

Top lef t : The Coca-ColaCompany leads the worldin production and distribu-tion of soft drink syrupsand concentrates. In theU.S., 16 Coca-Cola USAbranch operations providesyrups and concentratesfor bottlers and fountainwholesalers.

Top right: Coca-Cola, [heworld's number one softdrink by a wide margin, ismarketed by more than1,500 franc hised bottlersaround the globe. Bypro viding superior serviceto retailers, bottlers ofCoca-Cola reinforce theCompany's sales leader-ship in the U.S. take-homemarket segment.

Bottom: With its strongappeal to active, diet-conscious consumers, TABis the number one-sellingsugar-free soft drink in theU.S. A 10percent unitsales increase in 1980enhanced the brand'sdomestic leadership.

By authorizing use of HFCS-55 in Coca-Colaand committing to future purchases, the di-vision encouraged investment by the entirecorn wet-milling industry in new HFCS-55capacity, triggering its availability to the en-tire soft drink industry sooner than otherwisepossible. In addition to use of the corn sweet-ener in all of the Company's allied products,approximately half of all sales of Coca-Colaare now in the new 50/50 blend.

Packaging innovations also continued, in-cluding test marketing of a half-liter plastic(P.E.T.) one-way bottle. The bottle replacesprevious generic designs for plastic packagingwith the characteristic contour shape familiarto consumers of Coca-Cola everywhere. Initialconsumer reaction has been highly favorable.

Also unveiled in 1980 was a newly designedvending machine for Coca-Cola featuring alarge, vertical logo of "Coke" illuminatedthrough a virtually unbreakable plastic front.The new machine, coupled with the continua-tion of the Company's equipment financingprogram for its bottlers, is expected to furtherincrease Coca-Cola USA's market share leadin this important business segment.

As it has since 1928, the Company continuedits Olympic support in 1980 when Coca-Colawas the official soft drink of the Olympic Win-ter Games in Lake Placid, New York. Similararrangements have been finalized for the 1984Summer Games, to be held in Los Angeles.

Advertising awareness for Coca-Cola main-tained its high level with the "Have a Cokeand a smile" theme first introduced in mid-1979. The product's popular "Mean" JoeGreene commercial received the highest ac-colades of both consumers and the advertisingindustry and captured numerous awards as thebest television commercial of 1980.

Allied Brands Show Excellent Growth

Allied soft drink brands continued to showstrong U.S. sales in 1980. Gaining 10 percent inunit sales, TAB significantly increased its house-hold penetration and is the nation's sugar-freeleader in all channels of distribution.

Sprite, the Company's third largest U.S.brand, was introduced into Los Angeles, thenation's second largest soft drink market, in1980. The brand is now available virtuallynationwide and continues to gain market sharewithin the lemon-lime category as it signifi-cantly outgrows its principal competition.

Fresca, with an improved formulation, newpackaging graphics and advertising, reachedful l national availability in 1980, supported bythe most extensive sampling program ever con-ducted for a soft drink product.

Mello Yello, "the World's Fastest Soft Drink';continued its rapid growth and was available to62 percent of the U.S. population by year-end,bolstered by its highly successful introductionin New York, the nation's largest market. Unitsales of Mello Yello outpaced the prior year bymore than 30 percent.

Mr. PiBB, also reformulated in 1980, intro-duced a new spicy-cherry taste that is expectedto meet with good consumer acceptance.Ramblin' Root Beer continues to performabove expectations in its test markets.

As the only soft drinks on the market withthe minimum recommended daily requirementof Vitamin C, Hi-C non-carbonated, flavoredsoft drinks were repositioned effectively in1980 as nutritious products for use in schoolsand tripled in bottler acceptance.

Continued Sales Growth for U.S. Foreseen

Coca-Cola USA management views the fu-ture as promising. In 1981, the division antici-pates that the underlying strength of thedomestic soft drink industry will generateindustry unit growth of about 3 percent inspite of the relatively soft economy and thatCompany growth will again exceed industrygrowth. The continued increase in per capitaconsumption of soft drinks, matched by ex-panding distribution to areas such as drugstoresand mass merchandising outlets, indicates afavorable environment for future sales.

By commitment to high quality, continuedproduct improvement, innovative packagingand sales support to its bottlers and whole-salers, Coca-Cola USA is positioned to gain alarger share of the U.S. market.

Pacific Markets Anticipate Upturn

The performance of the Company's PacificGroup, which last year comprised a 12,000-milearc of countries stretching from Canada toAustralia, including Japan, was hindered bynegative operating conditions in several mar-kets as unit volume declined by 6 percent.As a result, 1980 profits were below 1979 levels.

Japan, the Pacific Group's major marketand the f o u r t h largest in the world for theCompany's products , su f fe red th rough i tsworst weather in over a century. The recordrainfall greatly affected sales during the keysummer months, when a large percentage ofsoft drinks are purchased from outdoor vend-ing machines and coolers. Due to the poorweather, compounded by a flattened economyand a decline in consumer spending, unit salesof soft drinks in Japan were more than 10 per-

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Top: Sprite, Coca-ColaUSA's third largest brand,made its Hollywood debutin 1980. With its introduc-tion in the Los Angelesarea, the lemon-lime-flavored soft drink is nowavailable virtuallynationwide.

Boltom: New York Citywelcomed the 1980 intro-duction of Mello Yello,Coca-Cola USA's success-ful citrus-flavored softdrink. Unit sales of MelloYello across the countrygrew more than 30percentin 1980.

cent under 1979 levels in an industry whichdropped by an even greater amount.

With per capita consumption of soft drinksin Japan only 20 percent of that in the UnitedStates, the Company's primary focus will re-main on promoting the outstanding potentialfor Coca-Cola and other Company productsin all segments of the market. Anticipating animproved economy and favorable weather,the Company expects unit sales growth torebound with a 5 to 10 percent increase inJapan in 1981, but recognizes the need to re-stimulate consumer demand.

Chinese Bottling Plant to Open

The introduction of Company soft drinks inthe People's Republic of China continued onschedule in 1980 as ground was broken for thefirst bottling plant, near Beijing (Peking).Slated to open in the spring of 1981, the plantwill have a capacity of two million cases peryear. Both Coke and Fanta Orange have beenshipped into China for limited sale to foreignvisitors since 1979, and these products arein great demand. The People's Republic ofChina offers vast potential for Company softdrink sales in the coming decade.

Another growth market is Australia, where aunit sales increase of almost 15 percent out-paced the industry in 1980. The Company'sleadership position in Australia is underscoredby the fact that TAB is now the number twocola (behind Coca-Cola) in this well-developedand highly competitive market. An improvingeconomy, matched by recent innovations inpackaging and a strengthened fountain seg-ment, has positioned the Company for contin-ued good growth in 1981.

In Canada, sales volume was slightly aheadof last year. Company performance late in theyear was encouraging, and a moderate increasein Canadian sales volume, slightly higher thanthe industry, is anticipated in 1981.

The entire Canadian soft drink industrycontinues to be adversely affected by the 1979government ban on the 1.5-liter returnablebottle, which formerly accounted for about 15percent of sales. The bottle has now been reap-proved based on new design specifications,and it is expected that the equipment neces-sary to meet the new regulations will be put inplace by the fourth quarter of 1981.

The Pacific Group's Far East Division in-cludes the newly industrialized countries ofSouth Korea, Taiwan, Hong Kong, and Singa-pore, and the developing countries of thePhilippines, Thailand, Malaysia, and Indonesia.With typically rapid growth in population,gross national product and per capita income,

most of these nations have been importantgrowth markets for the Company. In 1980,however, poor weather, a depressed economicclimate and political unease in key countriesresulted in a reduction in unit sales volume ofabout 5 percent for the area as a whole.

Sales in Korea dipped about 10 percent in1980, a lesser rate of decline than the Koreansoft drink industry as a whole. Sales also de-creased moderately in the Philippines. InThailand, the Company outperformed an in-dustry whose volume was down due to severeretail price increases; a solid gain in Companysales volume is seen for 1981.

For the Pacific area markets, a general up-turn in operating conditions is expected tospur unit sales growth between 5 and 10 percentin 1981. following the decline in 1980. Long-term prospects are even more favorable.

Momentum Increases in Latin America

Momentum continues particularly strongfor Coca-Cola Latin America, reflecting bothimproved political and economic stability.Latin American operations, which include themajor markets of Mexico, Brazil and Argentina,achieved an 8 percent gain in unit sales and agood increase in profits in 1980.

In Mexico, the second largest market for theCompany's products after the United States,sales were up moderately, and bottler expan-sion was intense. Volume growth would havebeen significantly greater if not for a bottlingplant strike in the Mexico City territory andthe effects on consumption of an industry-wideprice increase. A booming economy and theaddition of seven new bottling plants, plusincreased capacity in- existing ones, positionthe Company for an excellent year in 1981.

In Brazil, despite serious balance of pay-ments and inflation problems, Company busi-ness moved forward. Concentrate shipments forCoca-Cola and allied brands were up morethan 10 percent, far above the industry as awhole. Bottlers continue to invest in new facil-ities and equipment in this important market,where an unusua l ly young population en-hances growth potential.

Argentina has emerged as a key profit cen-ter where the Company's products lead themarket by a wide margin. Industry growth andpolitical stability helped 1980 unit sales volumegrow at about 20 percent over 1979, aided bystrong performances from Fanta and Sprite.Keepingpace with an increasingly sophisticatedmarket, the Company is introducing low-caloriedrinks, cans, one-way glass bottles, and 2-literplastic bottles. New bottling plants and bottlerfranchises are being opened as part of a vig-orous territorial expansion program.

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Top lefl: The world's thirdlargest selling soft drink isFanta Orange, pan of theCompany's broad line ofFanta fruit flavors. Fantusoft drinks are mostsuccessful in countriesoutside the U.S., such asJapan, the fourth-rankingmarket for Companyproducts.

Top right: The brand imageof Coca-Cola is dominantin Brazil, the third targes/market for Company prod-ucts, where sales grewmore than 10percent in1980.

Bottom: Bottlers ofCoca-Cola in Germanyplay the leading role inEurope's largest soft drinkmarket. Vending programsin 1980 helped the Companymaintain its record ofoutperforming the industryin that country.

Growing economies and further bottlerinvestment in new plant and distribution fa-cilities have contributed to impressive unitvolume gains in Colombia, up almost 15 per-cent, and Ecuador, up more than 25 percent.Prospects are quite favorable for future growthin volume and profit. In Venezuela, the Com-pany stabilized its position in a competitivemarket and is implementing a long-rangegrowth plan as business conditions improve.

The consolidated operation of Uruguay/Paraguay accomplished an increase of 15 per-cent over the solid gains of 1979. The softdrink market in Chile is improving, and 1980saw both expanded market share and a steadyrise in sales volume for the Company. Unitsales also showed good growth in Peru.

Based on increases in total volume andexcellent profit growth in 1980, the Companylooks for an even better performance fromLatin America in 1981.

Sales Volume Up for Europe and Africa

The Europe and Africa Group achieved a 7percent unit sales volume gain in 1980 and anincrease in profits, despite a cold, rainy sum-mer and economic constra ints in westernEurope. U n i t volume increases in westernEurope were highlighted by a 7 percent climb inItaly. The Company leads the industry in de-veloping the Italian market, and a success-fu l promotional campaign for Coke has posi-tioned the Company for greater gains in 1981.

Volume was up slightly in 1980 in the slowlydeveloping French market, and Companygrowth continues to outpace the industryin highly competitive Belgium. A new plasticpackage and other innovations are being intro-duced in Belgium to meet consumer demand.

The active German market is the f i f thlargest in the world for Company products.Germany boasts the largest soft drink industryand the highest per capita consumption of softdrinks in Europe, although the level is abouthalf that of the United States. Company salesgains continued to exceed the industry rate in1980, but were up only slightly due to a cold,rainy summer and a slowing economy.

The Company continues its leadership andhas by far the largest share of Germany's fast-growing cola segment. In 1980, sales of Com-pany products, including Coca-Cola and FantaOrange, continued to grow faster than theGerman soft drink industry. Line extensionsof Sprite and Fanta and the introduction of1.5-liter returnable, refillable bottles are amongmarketing additions expected to complementsales increases there in 1981.

Company performance continues to exceedindustry performance in Spain despite the re-curring factors of a weakened economy andpoor weather. Full-year unit sales were up onlyslightly, in spite of a healthy fourth quartergain. Sales efforts have intensified with theintroduction of a 2-liter plastic package and anational advertising program. Sprite continuesto be highly successful. Spanish bottlers areinvesting heavily to continue their tradition ofsteady and consistent growth.

Unit sales in Great Britain decreased 10percent in 1980 as a result of poor weather andeconomic problems. Per capita consumptionof Coca-Cola has increased 40 percent in thelast three years, demonstrating the excellentgrowth potential seen in this market.

In the Soviet Union, Fanta increased its dis-tribution and sales in Moscow in 1980.

Egypt has become the largest market forthe Company in the Middle East following re-introduction of Company products in 1979.In 1980, sales of Company products increaseddespite the effects of an excise tax which re-duced overall soft drink consumption.

In Africa, 1980 results and prospects for thefuture are excellent. For Nigeria, a healthyeconomy and additional bottling capacity werekey factors in a substantial growth in salesvolume, and continued vigorous gains areexpected. New packaging and increased per-sonal income levels spurred gains in SouthAfrica, up about 20 percent in unit sales forthe year.

In 1981, the Company's Europe and AfricaGroup is expected to match or exceed its 7percent unit growth rate of 1980, including asignificantly improved performance in west-ern Europe.

In 1981, the Company expects moderate tostrong unit gains from each of its major foreignmarkets, particularly if the unfavorable weatherconditions which affected 1980 results returnto more normal patterns. Foreign growth isexpected to continue to outpace the UnitedStates due to restimulation of economicallyconstrained markets and the potential increasein total foreign per capita consumption of softdrink products.

Overall. 1980 performance by the Company'sworldwide soft drink operations has laid thefounda t ion for renewed pro f i t gains in theyears ahead. With the franchise system of bot-tlers stronger than ever and innovative pro-grams f i rmly in place to suppor t i t , theCompany approaches the coming year withenthusiasm and wi th a f u l l commi tmen tto long-term growth.

13

;

Foods Division

The Foods Division marketsthe following products:

Citrus juices, adesand powdered drinks

Minute MaidSnow CropSnow Crop Five AliveBright & EarlyHi-C

Coffees and teas Maryland ClubButter-Nut

Athe largest segment of the Company'snon-soft drink business, the Foods Divi-sion generated excellent sales and profitsin 1980, continuing its vigorous growth per-formance from 1979, when annual sales firsttopped the SI billion mark. In the past six years,sales and profits of the Houston-based divisionhave compounded at a rate of almost 20 per-cent annually.

In 1980, plastic products operations whichformerly comprised the Company's ConsumerProducts Division were aligned with the FoodsDivision. Annual sales of the combined oper-ations exceeded $1.2 billion in 1980.

Primarily responsible for the division's con-sistent growth are its active marketing pro-grams and a commitment to the developmentof new products to add to its widely recognizedbeverage lines, including: Minute Maid chilledand frozen concentrated citrus juices, ades andlemon crystals; Snow Crop frozen citrus con-centrates; Bright & Early breakfast drink;Hi-C fruit drinks and powdered drink mixes;and Maryland Club and Butter-Nut coffeesand teas.

The division has more than 20 manufactur-ing and production centers in the United States,with others located in several foreign countries,and utilizes a system of co-packers who pro-duce and distribute products in locales wherethe Company does not have its own installations.

The Foods Division is the largest citrusprocessor in the world and one of the largestfruit growers, with approximately 30,000 acresof citrus groves operating in Florida.

The citrus business has played a significantrole in the growth of the division. About 45percent of the division's 1980 sales were gen-erated by the fast-growing frozen and chilledcitrus juice categories. Coffee and tea ac-counted for a 30 percent share, followed by 12percent from fruit drinks and powdered drinkmixes. Other consumer products contributedthe remainder.

Minute Maid Increases Shareof Fast-Growing Citrus Juice Market

Minute Maid is a leader in the expandingcitrus juice market. Industry-wide, retail salesof frozen concentrated orange juice have grownin the past five years from almost $700 millionto more than $1.2 billion, and chilled orangejuice retail sales have more than tripled inthe period.

Juices are exhibiting substantial growth inconsumer popularity not only in the UnitedStates, but in most other parts of the world.

and the Foods Division is in an excellent posi-tion to take advantage of that trend. In 1980,unit sales of Foods Division frozen juices in-creased 15 percent, while unit sales of chilledjuices were up 35 percent.

The Minute Maid line has increased itsshare of market during the past five years fromslightly above 22 percent to more than 24 per-cent in the frozen orange juice segment andhas moved its share of the chilled orange juicemarket from 8 percent in 1975 to almost 21 per-cent in 1980. Both Minute Maid frozen andchilled juices set records in sales and profitsfor the year, gaining outstanding retailer fea-ture support as well as high consumeracceptance.

Minute Maid frozen concentrated orangejuice achieved a good increase in unit sales in1980. Minute Maid now has a greater sharethan all other branded products in the frozenconcentrate category combined, outdistancingits nearest competitor five to one.

Minute Maid chilled orange juice completednational distribution during 1980 with unitincreases of more than 35 percent over 1979in a category that was up more than 24 percentfor the year. Success in this rapidly expandingarea has been one of the key factors in thegrowth of the Foods Division.

The strength of the brand is illustratedfurther by the fact that it continues as thesales leader in grapefruit juice, pineapplejuice and lemonade, indicating continuedconsumer confidence in the quality of theMinute Maid brand name.

New Orange and Apple JuiceProducts Introduced

An innovative new product is now beingmarketed under the Minute Maid banner:reduced acid orange juice, developed for con-sumers who want the pure taste of orange juicewith less acid content. The amount of acid isreduced through a special production process,resulting in a smooth, yet natural-tastingorange juice.

The Minute Maid reduced acid juice hasbeen test marketed in Houston and Portland,Oregon, and currently is being sold in Houstonand the Dallas/Ft. Worth area. Evaluation ofinit ial marketing efforts, plus analysis ofneeded capital expenditure for manufacturingfacilities to process the new product, willdetermine future roll-out dates.

Minute Maid frozen concentrated applejuice, another new product, also was tested indifferent forms in 1980 in preparation for

15

Y

Top: The flagship productof the Company's FoodsDivision is Minute Maidfrozen concentrated orangejuice, which outsells itsclosest competitor by fiveto one.

Boitom: Minute Maidlemonade crystals, madefrom real lemon juice, area welcome addition to anylemonade stand. Theproduct showed a 7percentunit sales increase andgained share in thepowdered drink mixcategory in 1980.

national introduction in 1981. This is the divi-sion's first entry into the large, growing applejuice market. Heightened consumer interestin all-natural food is expected to support con-tinued expansion of this category, which hasalready more than doubled its sales in the pastfive years.

Minute Maid lemonade crystals showed agood unit sales increase in 1980. This salesgain can be attributed in part to the successof extensive consumer promotional events anda "20-lemon lemonade" advertising strategystressing the use of natural juices in the prod-uct. Industry unit sales for pre-sweetened pow-dered soft drinks lessened slightly during 1980due to rising sugar prices, but Minute Maidlemonade crystals bucked the trend.

Five Alive Early Profit Generator

Snow Crop Five Alive, made from the juiceof oranges, grapefruits, tangerines, lemons, andlimes, exceeded all expectations and becamea profit generator in its first ful l year of dis-tribution in 1980. Marketed as an all-naturalbeverage for refreshment throughout the day,Five Alive frozen concentrated juice drink isperhaps the nation's most successful new gro-cery product introduction of the year.

The solid success of Five Alive prompted thedevelopment and distribution of a new flavor,Five Alive Fruit Punch, which was rolled outduring the fourth quarter of 1980. The Com-pany currently is testing chilled Five Alive insouthern California and expects to distributethat product nationally during 1981.

While the citrus category enjoyed sales andprofit growth in 1980, fruit drinks (beverageswith about 10 percent fruit juice content) ex-perienced a general category decline.

Hi-C, the Foods Division's entry in this cate-gory, is still the leading brand with about 25percent of market share. However, repeatingthe pattern of 1974, soaring sugar prices in1980 resulted in reduced consumer purchases.Hi-C fruit-flavored drink mixes also were ad-versely affected by the increase. Consumerawareness of the Hi-C product line is expectedto enable the brand to rebound once sugarprices stabilize.

Marketing Program, Improved BlendsBoost Coffee Segment

The Butter-Nut and Maryland Club brandsof coffee continue to make a major contribu-tion to the profits of the Foods Division.Although rising prices and decreased per capitaconsumption resulted in an overall decline in

the coffee category in 1980, market share in theButter-Nut distribution area (primarily theMidwest) is growing, and Maryland Club isholding its market share in the southwesternUnited States, its main distribution area.

A total revitalization program features inten-sive marketing efforts and the introduction ofan improved blend for instant and roast andground coffee. Distinctive new packaging wasdesigned for both the Maryland Club andBut ter -Nut brands. In i t i a l ly placed in theHouston sales region, the Maryland Clubprogram was favorably received by consumers,and the Butter-Nut introduction occurred inthe Midwest in early 1981.

Consumer promotions and new televisionand print advertising featuring actress BettyWhite also are being launched to boost thecoffee business for the future.

Tenco Enjoys Outstanding YearTenco. an operating unit of the Foods Divi-

sion and the largest manufacturer and distrib-utor of private label instant coffees and teasin the world, continued its excellent perform-ance in 1980 with the second best year in itshistory.

The division recently acquired a tea bagproducing company, a step which complementsthe existing Tenco product line.Tenco-operatedfacilities are located in several cities in theUnited States, as well as in a number of for-eign countries.

In addition, the Foods Division generatesa significant volume of business with restau-rants and other institutions through its Food-service Department, which has increased itssales substantially during the past 15 years tomore than $120 million.

Foodservice represents an opportunity forgrowth as current lifestyles increase the amountof food consumed away from home. The FoodsDivision seeks to tap that potential by provid-ing restaurants, hotels, colleges, hospitals, andother institutions with a wide array of foodservice products.

Currently, about 85 different items in morethan 200 package sizes are available fromFoodservice, including both Foods Divisionand allied products purchased from othermanufacturers.

Military sales have provided the divisionwith another opportunity to market its prod-ucts. A worldwide network of brokers worksthrough United States military commissariesand exchanges to provide Foods Divisionproducts at installations in the U.S. and abroad.

The international business of the FoodsDivision is small, yet encouraging. Canada

17

Top left: Snow Crop FiveAlive, an all-natural frozenconcentrated beveragecombining the flavors offive fruit juices, turned aprofit in its first full yearof distribution in 1980.Top right: Presto Products,a fast-growing subsidiaryof The Coca-Cola Company,isa leading national supplierof disposable plastic pack-aging. Its four modernplants make such productsas Stretch Card IV, a clearplastic pallet wrap.

Bottom: The FoodsDivision launched anintensive coffee marketingprogram during IVSO,including the introductionof attractive new packagingfor Maryland Club alongthe Texas Gulf coast andother parts of theSouthwest.

continues to be a good market, and the con-clusion of a highly successful market test forHi-C powdered drink mixes in Brazil triggereda national roll-out there in 1980.

Market tests in Argentina also are faringwell, and exports to that country from Sucosdo Brasil, a joint venture between the FoodsDivision Brazil and Sucocitrico Cutrale S/A,are encouraging. Overall, the outlook for inter-national growth is positive.

The New Products Development Group atthe Foods Division remains extremely activein seeking ways to meet the growing, changingneeds of consumers for quality products. Thedivision expects to keep its commitment to

launching at least one major new producteach year.

The Coca-Cola Company Foods Divisionhas achieved numerous milestones in itsvigorous history of market growth. The no-table accomplishments of 1980 enable the divi-sion to look with optimism and confidencetoward maintaining its leadership in the citrusindustry while spurring significant growththrough the introduction of innovative newproducts.

In 1981, the Company expects further in-creases in sales and earnings from the FoodsDivision's citrus, coffee and tea. and plasticproducts operations.

Plastic Products

Operating units formerly comprisingthe Consumer Products Division andnow reporting through the FoodsDivision include Presto Products, Incor-porated; Winkler/Flexible Products, Inc.;and Belmont Springs Water Co., Inc.

Headquartered in Appleton, Wisconsin,Presto Products isenjoying excellent growthas a leading private label supplier of plasticbags, wraps and other disposable plasticfilm packaging to retail customers. Salesrevenues increased more than 30 percentin 1980, with a commensurate rise in profits.

Winkler/Flexible, Los Angeles-basedproducer of plastic cutlery and straws, alsoachieved good sales and profit increasesfor the year. This Company subsidiary mar-

kets its products primarily to food servicechains, hospitals and other ins t i tu t ionalfacilities.

Though relatively small components ofthe Company, these two operations havedemonstrated noteworthy growth rates.Both brought new production facilities online in 1980. Projections indicate that, by1983, Presto Products and Winkler/Flexibleshould be generating over $250 million insales and a significant profit contributionto the division.

An outstanding year also was reportedby Belmont Springs Water Co., Inc., a sub-sidiary located in Belmont, Massachusetts,which provides bottled water for residen-tial and industrial use.

19

' .I

i -

The Wine Spectrum

The Wine Spectrummarkets premium wines inthe U.S. under the followingbrand names:

Sterling VineyardsThe Monterey VineyardTaylorTaylor California CellarsGreat WesternCinzano

Backed by a sound,aggressive marketingplan, The Wine Spectrum became thefourth largest wine producer and mar-keter in the United States in 1980, Registeringnearly a 40 percent increase in case volumeand even greater dollar sales increases. TheWine Spectrum far outpaced the indus t rygrowth rate.

As its name implies, The Wine Spectrumembraces a diverse range of quali ty wines withproud traditions: Taylor California Cellarspremium generics and varietals; world-classSterling Vineyards (Napa Valley, California)estate-bottled vintage varietals; The MontereyVineyard (upper Monterey County, California)vintage varietals, California Classics andSpecial Signature wines; The Taylor WineCompany (Hammondsport, New York) LakeCountry and other premium table wines, NewYork State champagnes, Sparkling wines, ver-mouths, and dessert wines; Great WesternWinery New York State champagnes, varietalsand Solera dessert wines; and Cinzano fineItalian wines.

Through innovative marketing and adver-tising programs, the introduction of newproducts and packages and the opening ofnew markets, The Wine Spectrum continuesto be a trend-setter in a dynamic industry. Itsdedication to the goal of producing wines ofsuperior quality in every category is reflectedin the large number of awards won by its winesin competitions and international exhibitionsduring the year.

The Wine Spectrum's ever-improving posi-tion in the wine industry can be attributedlargely to a successful strategy of positioningitself for growth in specific segments of thewine market.

Table Wines Show Strong Growth

In particular, the Company's emphasis onthe p remium table wine segment reflectschanges in consumer preferences, evidencedby the substantial growth of table wines from32 percent in 1960 to over 75 percent of thetotal U.S. wine market in 1980. Table winesaccounted for 70 percent of The Wine Spec-trum's total volume in 1980, as compared to45 percent in 1977, and a continuation of thistrend is anticipated in future years.

Taylor California Cellars won distinction in1980 as the fastest-grow ing major wine brand inthis market segment for the second consecutiveyear. Sales volume of this premium table winebrand increased by 165 percent over the previous

year's figure, garnering a significant increasein market share.

New California Cellars Varietals Added

The Wine Spectrum spearheaded its effortsin the table wine segment in 1980 with the intro-duction of six new varietal wines under theTaylor California Cellars label. These wines(Chardonnay, Chenin Blanc, Riesling, Sauvig-non Blanc, Zinfandel, andCabernet Sauvignon)were produced from the most prestigiousgrape varieties grown in California in antici-pation of consumers trading up from genericwines to higher quality varietals for specialoccasions or everyday drinking. These newTaylor entries are positioned to offer goodvalue in a quality wine to more sophisticatedwine enthusiasts as well. Since their debut inMay of 1980, the varietals have met with out-standing acclaim.

Comparative advertising for Taylor Cali-fo rn ia Cellars generic wines (Chablis ,Burgundy, Rose, and Rhine) continued itssuccessful run and was a major factor in thevigorous growth of the brand.

Commercials Enhance Product Image

The effect of this direct and informativecampaign was to raise consumer awarenessand acceptance to an unprecedented level.The endorsement of Taylor California Cellarswines by noted wine authorities in televisioncommercials greatly enhanced the positiveimage of the product. Additionally, advertis-ing placed greater emphasis on the compati-bility of Taylor California Cellars wines withfood.

The Monterey Vineyard gives The WineSpectrum added strength in white wines, themost rapidly expanding segment in the tablewine industry. Its varietals and CaliforniaClassics wines achieved an outstanding 60percent increase in case sales in 1980, whiledemand for the Classic Red continued higheven though the red wine category as a wholewas sluggish. Paralleling the fast-growingreputation of Taylor California Cellars varie-tals, the acknowledgement by wine experts ofthe high quality of The Monterey VineyardClassics contributed to the success of the line.

Sterling Vineyards continued to produceaward-winning, estate-bottled wines prized bycollectors and connoisseurs. In addition, in1980 a decision was made to limit productionat the winery to its most outstanding varieties:

21

Top left: California Classicsand vintage varietal winesproduced by The MontereyVineyard, located in upperMonterey County, Cali-fornia, achieved excellentsales gains in 1980.

Top right: The fastest-growing American brandof premium table wines isTaylor California Cellars,which enjoyed a 165 percentsales increase in 1980. Sixnew varietal wines wereintroduced under theTaylor California Cellarslabel during the year.

Bottom: Taylor and GreatWestern New York Statechampagnes, two of thenation's favorite premiumchampagnes, add enjoy-ment to celebrations acrossAmerica.

Chardonnay, Sauvignon Blanc, Merlot, Caber-net Sauvignon, and Cabernet SauvignonReserve.

Taylor Leads Sparkling Wines, Champagnes

The Taylor and Great Western New YorkState brands maintained their leadership posi-tions in the sparkling wine segment, a marketcurrently growing by 10 percent annually.Taylor champagnes are by far the leadingpremium champagnes in the country, andGreat Western stands firm in the number threeposition.

The popular Taylor Lake Country line en-joyed excellent success, growing faster thanthe table wine category. Plans for expansioninclude the test marketing of a line of lowalcohol Lake Country soft wines to competewith Italian Lambruscos.

Though the dessert wine market as a wholeis declining, the well-recognized quality ofthe Taylor and Great Western brands enabledthese New York State sherries and ports tosignificantly increase market share and main-tain steady sales during 1980. The Wine Spec-trum also introduced Taylor Empire CreamSherry, a f ine, wood-aged dessert wine posi-tioned against imports in the super-premiumsegment.

Preparations were completed in 1980 forentry into Italian wine imports, a growth areawhich has skyrocketed from 18 percent of theimport market in 1970 to 63 percent in the firsthalf of 1980. In February of 1981, The WineSpectrum introduced into selected test marketsa red and a white Italian table wine bottledand marketed under the Cinzano label. Thisintroduction represents another positive stepin The Wine Spectrum's 1979 agreement withFrancesco Cinzano, S.P.A., to distribute se-lected Cinzano products in the U.S. and todevelop totally new ones bearing the Cinzanotrademark.

In addition to the introduction of these newproducts to existing markets, The Wine Spec-trum is opening up new frontiers for distribution.

Exports to U.K. Initiated

In 1980, the Company began to export TaylorCalifornia Cellars wines to the United King-

! dom, a promising market for premium tablewines. The Wine Spectrum's California CellarsWhite, Red and Rose are being distributedthrough England's largest grocery chain asthe first step in probing overseas exportmarkets.

Also, Great Western New York State cham-pagnes, varietals and dessert wines moved west-ward to new markets across the United States,a strategy aimed at eventual nationaldistribution.

Another step taken in the early autumn of1980 was the unveiling of Taylor CaliforniaCellars Chablis and Burgundy in 6.3-ouncealuminum cans, which were tested on selectedflights of United Airlines. Shatterproof andquick chilling, the cans also save weight andspace. Init ial results have been encouraging,underlined by generally favorable consumerreaction.

Expansion, Capital Spending Continue

Expanding in other areas, The Wine Spec-trum made substantial capital investments inits wineries in 1980. Major construction wasplanned in Gonzales, California, to support therapid growth of the Taylor California Cellarsline. Site preparation was begun in December1980, and a bottling and warehousing facility isscheduled to be completed in mid-1982.

On the east coast, the Finger Lakes growingregion of New York State experienced during1980 the finest vintage recorded in its history.Taylor and Great Western wineries plan totake advantage of this remarkable vintagethrough substantial investment in French-American hybrid grape varieties and vinifica-tion equipment which will strengthen theirpreeminent positions in the eastern wine in-dustry and enhance their active participationin New York State's wine renaissance.

In a related move, The Wine Spectruminitiated a major campaign in 1980 tailored totap the ever-increasing share of dollars spentby Americans eating outside the home. Studieshave shown that the American wine consumeris educated and influenced by restaurant wineselections and that this exposure influenceswine purchases for the home. To take fulladvantage of this growth area, The WineSpectrum plans major advertising, educationaland materials programs targeted at restaura-teurs for 1981.

The outlook for The Wine Spectrum ispositive and exciting. Wine consumption inthe United States is expected to grow at acompound annual rate of 8 percent over thenext decade, and The Wine Spectrum expectsto grow significantly faster. The prospect isfor continued healthy volume and profitgrowth for The Wine Spectrum in 1981 as itscapital and marketing investments of the lastfew years bring greater returns.

23

Aqua-Chem,, Inc.

The need for clean water continues tocreate a demand for the advanced tech-nology systems developed by Aqua-Chem,Inc., a world leader in research and productionof pure water facilities through evaporation/pollution control and brackish/sea water de-salting. A subsidiary of The Coca-Cola Com-pany headquartered in Milwaukee, Aqua-Chemachieved a sales increase in 1980 to over $130million and a commensurate rise in earnings.

In addition to an emphasis on new waterpurification and pollution control applications,Aqua-Cnem's operations are geared to meetingthe problems of changing fuel supplies, aswell as lo working with Company soft drinkpersonnel to solve water quality and sourcingproblems around the world.

Market Growing for Energy-EfficientWater Technology Systems

Development of systems for potable wateris a major goal of Aqua-Chem's Water Tech-nologies Division. The worldwide energyshortage underlies the growing market for itshighly eff ic ient evaporators and large-scaledesalting systems, especially for the recovery

of reusable products in the chemical processindustry.

Significant among product introductions bythis subsidiary in 1980 were the design andmanufac ture of reverse osmosis water desalt-ing systems for the first bottling plant forCoca-Cola in Beijing (Peking), China, the firstreverse osmosis system for use on a navalcombat ship and the installation of similardesalting systems on numerous off-shore rigs.The division's reverse osmosis system is themost advanced and eff ic ient water purifica-tion system in use today.

A record year also was experienced forAqua-Chem evaporators in the pulp and paperindus t ry and special process concentrationand by-product recovery applications. The1981 outlook for the Water TechnologiesDivision continues to be favorable, basedupon new order input, current backlogs andnew products planned for introduction.

Cleaver-Brooks Increases Sales,Expands Product Line

Aqua-Chem's Cleaver-Brooks Division is aworld leader in manufactur ing packagedboilers for producing steam and hot waterfor all types of commercial and industrialapplications. The division also markets acomplete line of supplemental boiler roomequipment which no other manufacturer inthe field offers.

Cleaver-Brooks maintained ils t radi t ional lyhigh market share in 1980 despite a temporari lydepressed construction industry and capitalgoods market.

Sales revenues from Cleaver-Brooks' boilersare up over the previous year. An expansionof Cleaver-Brooks' product base in steam andhot water generation currently is underwaywith the development of new, energy-efficientboiler-burner systems that will utilize solidfuels, waste fuels and nonstandard fuels, aswell as conventional fossil fuels.

Industr ial Combustion, Inc., an Aqua-Chemsubsidiary that manufactures and distributesconversion burners for existing boilers, alsoaccomplished a record business year. The in-creased avai labi l i ty of natural gas at a pricesubstantial ly lower than heating oil has beenlargely responsible for a dramatic sales in-crease over 1979, matched by an increase innet earnings. The subsidiary's current highlevel of sales activi ty is expected to continue.

24

80Financial ReportThe Coca-Cola Company and Subsidiaries

26 Selected Financial Data28 Management's Discussion and Analysis of

Results of Operations and Financial Condition30 Consolidated Statements of Income30 Consolidated Statements of Retained Earnings31 Consolidated Balance Sheets32 Consolidated Statements of Changes

in Financial Position33 Notes to Consolidated Financial Statements37 Report of Independent Accountants38 Report of Management39 Quarterly Data39 Cash Dividends39 Stock Market Information40 Industry Segments41 Operations in Geographic Areas42 Supplemental Information on the Effects

of Changing Prices45 Board of Directors and Corporate Officers46 Officers Operating Units48 Other Information

25

The Coca-Cola Company and SubsidiariesSelected Financial Data (a) (In thousands except per share data)

YEAR ENDED DECEMBER 31, 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971

Net salesGross profitOperating incomeIncome before incometaxesIncome taxesNet income

Average common shares outstanding (c)Net income per share (c)Dividends per share (c)Total assetsStockholders' equity at year-endCash and securitiesTotal debtLong-term debt

% Net income to net sales% Net income to average stockholders' equity

Capital expendituresDepreciation

$5,912,5952,486,706

768,280764,299342,191422,108

123,578$ 3.42

2.16

$3,405,9582,074,738

289,071228,336133,221

7.1%21.1%

$ 293,071133,807

$4,961,4022,167,376

719,354742,192322,072420,120

123,549$ 3.40

1.96

$2,938,0411,918,704

208,536139,18930,989

8.5%23.0%

$ 381,401112,939

$4,337,9171,899,729

678,086691,396316,704374,692

123,503$ 3.03

1.74

$2,582,8091,739,610

369,31769,14115,231

8.6%22.6%

$ 306,02294,024

$3,619,8351,566,151

602,742614,900283,737331,163

123,464$ 2.68

1.54

$2,254,4901,578,034

417,98257,30415,303

9.1%22.0%

$ 264,36882,459

$3,146,0071,376,891

534,534552,165258,035294,130

123,418$ 2.38

1.325

$2,006,8381,434,555

402,85051,64910,762

9.3%21.5%

$ 190,60772,377

$2,979,3501,198,731

472,639479,330230,545248,785

123,356$ 2.02

1.15

$1,801,0231,302,135

409,19042,48215,777

8.4%20.0%

$ 145,32069,123

$2,613,7041,011,244

362,220379,983176,209203,774(b)123,247

$ 1.65(b)1.04

$1,610,4901,189,888

260,10568,59911,862

7.8%17.7%

$ 153,72061,823

$2,226,0721,027,775

408,815419,479195,732223,747

123,130$ 1.82

.90

$1,461,2491,109,128

308,05424,361

8,317

10.1%21.3%

$ 126,87461,017

$1,945,177909,679372,287379,352180,946198,406

122,832$ 1.62

.82

$1,290,408990,860241,029

34,7737,123

10.2%21.2%

$ 119,15257,642

$1,785,041825,930336,219340,342166,165174,177

122,603$ 1.42

.79

$1,156,136884,799195,15537,1131 1 ,404

9.8%20.8%

$ 103,40554,185

Notes:(a) Includes results for Presto Products,

Incorporated, and The Taylor WineCompany, Inc., which were combinedwith the Company in transactionsaccounted for as poolings of interestsin 1978 and 1977, respectively.

S 5 9 1 3 Net Sales (Millions) S768 Operating Income (Millions!

(b) In 1974, the Company adopted the last-in,first-out (LIFO) accounting method forcertain major categories of inventories.This accounting change had the effectof reducing net income in 1974 by $31.2million ($.25 per share).

Net Income Per Share

(c) Adjusted for a two-for-one stock split in 1977.

Dividends Per ShareS2.16 $2,075

Stockholders' Equity at Year-End (Millions) Cash and Securities (Millions)Total Debt Long-Term Debt

'71 72 -73 74 75 76 77 78 79 '80 75 76 77 78 79 '80 71 72 73 '74 75 76 77 78 79 '80 71 72 '73 74 75 76 77 78 79 '80 71 72 73 74 75 76 77 78 79 '80

26 27

Management's Discussion and Analysis of Resultsof Operations and Financial Condition

Results of Operations

Statements of Income: Net sales in-creased 19.2% in 1980, following a 14.4% in-crease in 1979. Net sales of soft drinks in1980 increased 20%, due to a 3% increase inunit sales plus increased selling prices andthe effects of changes in the Company's prod-uct mix. Unit shipments of soft drink syrupsand concentrates in the U.S. were up morethan 2% in 1980 and would have increasedmore except for the effects of bottlers andfountain wholesalers building stocks of syrupsand concentrates in December 1979 in antic-ipation of January 1980 price increases. Softdrink sales were well ahead of 1979 levels inLatin America and Europe/Africa, but werebelow 1979 levels in the Company's Pacific/Canada Group as a result of a combinationof economic and weather-related events inJapan and the Far East. Net sales of non-softdrink products increased 16% in 1980.

In 1979, net sales of soft drinks increased14% due to an 8% increase in unit sales, plusincreased selling prices and the effectsof changes in the Company's product mix.Unit shipments of soft drink syrups and con-centrates in the U.S. were up 5% in 1979, par-tially as a result of changes in bottler inven-tory levels. Soft drink sales were significantlyabove 1978 levels in each of the Company'sforeign geographic regions. Net sales of non-soft drink products increased 16% in 1979.

Gross profit increased 14.7% in 1980,following a 14.1% increase in 1979. The 1980and 1979 increases were due to higher unitsales in all product categories except coffeeand increased gross profits per unit. Grossprofits increased at a lesser rate than salesin 1980, mainly because of significantly highersugar prices in 1980 compared to 1979;changing sugar prices affect the Company'snet sales and cost of goods sold, without acorresponding impact on gross profits.

Selling, administrative and general ex-penses increased 18.7% in 1980, following an18.5% increase in 1979. Both the 1980 and1979 increases reflected expanded marketing

programs, increased expenses associatedwith the Company's new Atlanta of f icecomplex and the effects of general infla-t ion. Media adver t is ing spending was$395 million in 1980, compared to $343 mil-lion in 1979, and $270 million in 1978. Theincreases in both 1980 and 1979 reflect in-creased advertising of soft drinks in theUnited States and overseas markets and in-creased spending related to the Company'swine and citrus products.

Interest earned increased in 1980 and1979 due to higher interest rates, partially off-set by lower average invested balances. Theincreases in interest expense in 1980 and1979 were due to higher interest rates andthe Company's increased use of debt.

The Company's unusually low tax rate in1979 was due primarily to investment taxcredits taken on the Company's Atlanta officecomplex and to the effects of a change inUnited Kingdom tax legislation (see Note 10to the consolidated financial statements).

Changing Prices: For an explanation ofthe impact of the effects on the business ofchanging prices and inflation, please refer tothe Supplemental Information on the Effectsof Changing Prices.

Profitability Ratios: Net income as a per-centage of net sales for 1980 was 7.1%, com-pared to 8.5% in 1979, and 8.6% in 1978. Thereturn on equity, or net income as a percent-age of average stockholders' equity, was21.1% in 1980, compared to 23.0% in 1979,and 22.6% in 1978.

The decline in return on sales was dueprimarily to higher raw material costs, pri-marily sugar and concentrate ingredients, aswell as increases in marketing expenditureson soft drinks, wine and citrus products.

The decline in return on equity from 1979to 1980 was due primarily to the relativelysmall increase in net income shown by theCompany in 1980.

28

Management's Discussion and Analysis of Resultsof Operations and Financial Condition (continued)

Financial Condition

Debt and Equity: The increase in totaldebt and total cash and securities in 1980 re-flects the Company's issuance of $100 millionin five-year notes, at an attractive interestrate of 9% %. The proceeds of the notes wereused to replace short-term, primarily seasonal,borrowings. At year-end 1980, however, long-term debt expressed as a percentage ofstockholders' equity was only 6%, and muchof the proceeds from the notes were investedin short-term, interest-bearing certificates.

The increase in total debt and decreasein cash and securities in 1979 reflectedspending on the Company's Atlanta officecomplex, expansion of wine operations, ac-quisitions including The Atlanta Coca-ColaBottling Company, and increased workingcapital requirements throughout the business.

Working Capital: The increase in workingcapital from 1979 to 1980 was due to increasedinventory reflecting in part higher rawmaterial costs, increased trade accounts re-ceivable reflecting higher selling prices, and

decreased notes payable reflecting increaseduse of long-term debt. A partially offsettingfactor was the increased accounts payablereflecting maximum use of suppliers' credit.

The decline in working capital from 1978to 1979 was primarily due to the decrease incash and current marketable securities com-bined with an increase in short-term debt re-flecting the Company's cash acquisition ofThe Atlanta Coca-Cola Bottling Company andother companies, the replacement and ex-pansion of facilities to meet the needs of theCompany's expanding business, and a highlevel of spending related to the expansion ofthe Company's Atlanta office headquartersand wine operations. Partially offsetting fac-tors included increased trade accounts re-ceivable, reflecting increased sales volume,higher selling prices and the inclusion of pur-chased companies in 1979; and higher inven-tories resulting in part from increased rawmaterial costs, and the inclusion of pur-chased companies in 1979.

29

The Coca-Cola Company and SubsidiariesConsolidated Statements Of Income (In thousands except per share data)

YEAR ENDED DECEMBER 31,

Net salesCost of goods sold

GROSS PROFIT

Selling, administrative and general expenses

OPERATING INCOME

Interest incomeInterest expenseOther income (deductions) net

INCOME BEFORE INCOME TAXES

Income taxes

NET INCOME

Net income per share

Consolidated Statements of Retained(In thousands except per share data)

YEAR ENDED DECEMBER 31,

Balance at January 1Net income for the year

Dividends paid in cash:The Coca-Cola Company (per share 1980,

$2.16; 1979, $1.96; 1978, $1.74)Presto Products, Incorporated, prior to

combination

BALANCE AT DECEMBER 31

1980

55,912,5953,425,889

2,486,706

1,718,426

768,280

40,77435,218(9,537)

764,299

342,191

$ 422,108

5 3.42

Earnings

1980

$1,759,367422,108

266,928

$1,914,547

1979

$4,961,4022,794,026

2.167,376

1,448,022

719,354

37,04810,676(3,534)

742,192

322,072

$ 420,120

$ 3.40

1979

$1,581,406420,120

242,159

$1,759,367

1978

$4,337,9172,438,188

1,899,729

1,221,643

678,086

34,7187,762

(13,646)

691,396

316,704

$ 374,692

$ 3.03

1978

$1,421,356374,692

214,344

298

$1,581,406

See Notes to Consolidated Financial Statements

30

The Coca-Cola Company and SubsidiariesConsolidated Balance Sheets (In thousands except share data)

December 31Assets

CURRENTCashMarketable securities, at cost (approximates market)Trade accounts receivable, less allowance of $8,594 in

1980 and $8,113 in 1979InventoriesPrepaid expenses

TOTAL CURRENT ASSETSINVESTMENTS AND OTHER ASSETSPROPERTY, PLANT AND EQUIPMENT

Land and improvementsBuildingsMachinery and equipmentContainers

Less allowance for depreciation

FORMULAE. TRADEMARKS, GOODWILL ANDCONTRACT RIGHTS

Liabilities and Stockholders' Equity

CURRENTNotes payableCurrent maturities of long-term debtAccounts payable and accrued expensesAccrued taxes including income taxes

TOTAL CURRENT LIABILITIES

LONG-TERM DEBT

DEFERRED INCOME TAXES

STOCKHOLDERS' EQUITYCommon stock, no par value-authorized 140,000,000

shares; issued 123, 989, 854 shares in 1980and 123, 960, 295 shares in 1979

Capital surplusRetained earnings

Less 401 ,338 shares of stock held in treasury, at cost

1980

5 129,685101,401

523,123810,235

57,8091,622,253

302,184

96,567537,235

1,183,438314,349

2,131,589790,749

1 ,340,840

140,681$3,405,958

1980

$ 87,5877,528

733,023233,442

1,061,580

133,221

136,419

62,372113,172

1,914,5472,090,091

15,3532,074,738

$3,405,958

1979

$ 106,88641,685

435,079669,614

52,3391,305,603

206,975

97,906518,517

1,092,882292,085

2,001,390717,212

1,284,178

141,285$2,938,041

1979

$ 103,8164,384

576,862199,099

884,161

30,989

104,187

62,357112,333

1,759,3671,934,057

15,3531,918,704

$2,938,041

31

The Coca-Cola Company and SubsidiariesConsolidated Statements of Changes in Financial Position (in thousands)

YEAR ENDED DECEMBER 31. 1980 1979 1978

SOURCE OF WORKING CAPITALFrom operations:

Netincome $422,108 $420,120 $374,692Add charges not requiring outlay of working

capital during the year:Depreciation 133,807 112,939 94,024Deferred income taxes 33,104 12,298 19,070Other (principally amortization of

goodwill and container adjustments) 38,084 29,546 19,549TOTAL FROM OPERATIONS 627,103 574,903 507,335

Increase in long-term debt 99,415 7,234Disposals of property, plant and equipment 77,053 25,041 17,127Proceeds from exercise of stock options

and appreciation rights 726 921 1,228Tax benefit from optioned shares sold 128 212 318

804,425 608.311 526,008

APPLICATION OF WORKING CAPITALCash dividends:

The Coca-Cola Company 266,928 242,159 214,344Presto Products, Incorporated 298

Additions to property, plant and equipment 287,186 329,559 306,022Acquisitions of purchased companies

excluding net current assets:Property, plant and equipmentnet 5,885 51,842Other assets including goodwill, net

of other liabilities 7,593 23,456Increase in investments and other assets 95,254 25,223 16,277Decrease in long-term debt 72Other 2,348 7,147 3.696

665,194 679.386 540,709INCREASE (DECREASE) IN WORKING

CAPITAL $ 139,231 $ (71.075) $ (14,701)

INCREASE (DECREASE) IN WORKINGCAPITAL BY COMPONENT

Cash $ 22,799 $ (49,265) $ 6.780Marketable securities 59,716 (123,655) (34,879)Trade accounts receivable 88,044 96,788 58,440I nventories 140,621 131,353 96,747Prepaid expenses 5,470 13,820 5,956Notes payable 16,229 (55,573) (10,962)Current maturities of long-term debt (3,144) 1,283 (947)Accounts payable and accrued expenses (156,161) (66,830) (113,759)Accrued taxes including income taxes (34,343) (18.996) (22,077)INCREASE (DECREASE) IN WORKING

CAPITAL $JJ9,231 $ (71,075) $ (14.701)

See Notes to Consolidated Financial Statements

32

Notes to Consolidated Financial Statements

1. Accounting Policies. The major accountingpolicies and practices followed by the Com-pany and its subsidiaries areas follows:

The consolidated financial statements in-clude the accounts of the Company and itsmajority-owned subsidiaries. All significantinter-company accounts and transactions areeliminated in consolidation.

Inventories are valued at the lower ofcost or market. The last-in, first-out (LIFO)method of inventory valuation is used forsugar and other sweeteners used in domesticbeverages, for certain major citrus concen-trate products, and for substantially all inven-tories of domestic bottling subsidiaries, wineproducts and certain other domestic andforeign operations. All other inventories arevalued on the average or first-in, first-out(FIFO) method. The excess of current costsover LIFO stated values amounted to approxi-mately $109,000,000 and $71,000,000 at De-cember 31, 1980 and 1979, respectively.

Property, plant and equipment is statedat cost, less allowance for depreciation, ex-cept that foreign subsidiaries carry bottlesand shells in service at amounts (less thancost) which, in general, correspond withdeposit prices obtained from customers.Approximately 87% of depreciation expensewas determined by the straight-line methodfor each of the three years in the periodended December 31, 1980. A portion of thedepreciation determined by the straight-linemethod for financial statement purposes iscalculated on accelerated methods for in-come tax purposes. Deferred income taxesare provided to recognize timing differencesin reporting depreciation for accounting andtax purposes. The investment tax credit isaccounted for by the flow-through method.

Formulae, trademarks, goodwill and con-tract rights are stated on the basis of costand, if purchased subsequent to October 31,1970, are being amortized, principally on astraight-line basis, over the estimated futureperiods to be benefited (not exceeding 40years). Accumulated amortization amountedto $12,189,000 and $9,313,000 at December31,1980 and 1979, respectively.

At January 1, 1980, the Company begancapitalizing interest cost as part of the costof acquisition or construction of major assetsas required by Statement of Financial Ac-counting Standards No. 34. The Companypreviously followed the policy of expensinginterest costs as incurred. In 1980, $5,674,000of interest expense was capitalized, which in-creased 1980 net income by $2,705,000.

The Company has followed the policy ofcharging expense with vacation costs in theperiod that vacations are actually taken. Pur-suant to the requirements of Statement ofFinancial Accounting Standards No. 43, theCompany will in 1981 adopt the policy ofcharging expense with vacation costs assuch vacations are earned. This change inaccounting for vacation costs will not havea material effect on the Company's financialstatements.

2. Inventories. The principal categories ofinventories shown in the balance sheet areas follows (in thousands):

DECEMBER 311980 1979

Finished productsWork in processRaw materials and supplies

$214,108 $193,350113,348 98,522482,779 377.742

5810,235 $669.614

3. Short-Term Borrowings and Credit Arrange-ments. Notes payable include amounts pay-able to banks of $87,587,000 and $88,192,000at December 31,1980 and 1979, respectively.The remaining notes payable are primarilycomposed of amounts payable to suppliers.

Under line of credit arrangements forshort-term debt with various financial insti-tutions, the Company and its subsidiaries mayborrow up to $311,472,000. These lines ofcredit are subject to normal banking termsand conditions. At December 31, 1980, theunused portion of the credit lines was$223,885,000. Some of the financial arrange-ments require compensating balances whichare not material.

33

Notes to Consolidated Financial Statements (continued)

4. Accounts Payable and Accrued Expenses.Accounts payable and accrued expensesare composed of the following amounts (inthousands):

DECEMBER 311980 19/9

Trade accounts payable S61 8,548 $478,700Deposits on bottles and shells 69,428 62,961Other 45,047 3b 201

5733,023 $576,862

5. Accrued Taxes. Accrued taxes are com-posed of the following amounts (in thousands):

DECEMBER 311980 1979

Income taxes 5152,590 $137,503Sales, payroll and

miscellaneous taxes 80,852 61,596$233,442 $199,099

6. Long-Term Debt. At December 31, 1980,long-term debt consisted of the following (inthousands):9%% notes due June 1, 1985 $ 99,867Other 40,882

140,749Less current portion 7,528

$133,221

Maturities of long-term debt for the fiveyears succeeding December 31, 1980, are asfollows (in thousands):1981 $ 7,5281982 3,7061983 2,5561984 3,1961985 103,185

7. Changes in Capital during 1980, 1979 and1978 were as follows (in thousands):

Common Stock Issued CapitalShares Amount

Balance January 1,1978 123,875 $62,315

Sale of stock toemployeesexercising stockoptions 50 25

Tax benefit fromsale of option sharesby employees

Cash in lieu offractional shares-Presto merger

Balance December 31,1978 123,925 62,340

Sale of stock toemployeesexercising stockoptions 35 17

Surplus

$109,716

1,203

318

(20)

111,217

904

The 97/&% notes may not be redeemedbefore June 1,1983. After that date the notesmay be redeemed at the option of the Com-pany in whole or in part at 100% of their prin-cipal amount, plus accrued interest. Thenotes include various restrictions, none ofwhich is presently significant to theCompany.

Other long-term debt consists of variousmortgages and notes with maturity datesranging from 1981 to 2010. Interest on a por-tion of this debt varies with the changes inthe prime rate, and the remainder bears in-terest at rates ranging from 5.0% to 15.8%.

Tax benefit fromsale of option sharesby employees

Balance December 31,1979

Sale of stock toemployeesexercising stockoptions andappreciation rights

Tax benefit fromsale of option sharesby employees

Balance December 31,1980

212

123,960 62.357 112,333

30 15 711

128

123,990 $62,372 $113,172

34

Notes to Consolidated Financial Statements (continued)

8. Stock Options. The Company's 1979 stockoption plan covering 1,000,000 shares of theCompany's common stock provides for thegranting of stock appreciation rights andstock options. Stock options and stock appre-ciation rights under the plan are granted tocertain officers and employees of the Com-pany and its subsidiaries. Stock appreciationrights permit the holder, upon surrenderingall or part of his/her related stock option, to re-ceive cash, common stock, or a combinationthereof, up to 100% of the difference be-tween the market price and the option price.Shares covered by such surrendered stockoptions or portions thereof are not availablefor the grant of further stock options. Op-tions were held by officers and employees topurchase shares of the Company's commonstock under all stock option plans at pricesranging from $19.16 to $67.91 per share in1980, from $19.16 to $67.91 per share in1979, and from $9.09 to $67.91 per share in1978. Option prices on options exercisedranged from $19.16 to $24.97 per share in1980, from $9.09 to $41.38 per share in 1979,and from $9.09 to $43.59 per share in 1978.Further information relating to options is asfollows:

1980 1979 1978Options out-

standing atJanuary 1

Options grantedduring the year

Options exercisedduring the year

Options cancelledduring the year

Options out-standing atDecember 31

Optionsexercisable atDecember 31

Shares availablefor optionswhich may begranted

1,259,886 1,153,598

362,350

(29,559)(200,220)

262,242

(35,443)(120.511)

1,112,830

111,120

(50,112)(20,240)

1,392,457 1,259,886 1,153,598

728,067

400,408

718,912

737,758

610,275

19,644

In addition, an officer of the Companywas granted options for 25,000 shares of the

Company's common stock during 1980. Theoptions are exercisable at fair market valueon the date of the grant on a cumulative basisat the rate of 20% a year. Upon exercise ofthe options, shares will be made availablefrom treasury stock. Such options are not apart of any stock option plan.

9. Pension Plans. The Company and its sub-sidiaries sponsor or contribute to various pen-sion plans covering substantially all domesticemployees and certain employees in foreigncountries. Pension expense determinedunder various actuarial cost methods, prin-cipally the aggregate level cost method,amounted to approximately $34,000,000 in1980, $33,000,000 in 1979 and $28,000,000in 1978. Changes in the actuarial assump-tions for one plan reduced pension expenseby approximately $2,600,000 in 1980.

As of January 1, 1980, the actuarial pres-ent value of accumulated benefits of Com-pany and subsidiary-sponsored domesticplans, as estimated by consulting actuaries,was $165,773,000 {vested $152,772,000 andnon-vested $13,001,000), and the net assetsavailable for benefits were $165,448,000. Theassumed rate of return used in determiningthe actuarial present value of accumulatedplan benefits was approximately 8% for 1980,a weighted average of the rates publishedby the Pension Benefit Guaranty Corporationfor plan terminations occurring between De-cember 1, 1979, and February 29, 1980. Fordetermining the 1980 pension expense of theCompany's principal domestic retirementplan, a rate of less than 8% was used.

The Company has various foreign pen-sion plans which are not required to reportto certain governmental agencies pursuantto the Employee Retirement Income SecurityAct (ERISA) and do not otherwise determinethe actuarial value of accumulated plan bene-fits or net assets available for benefits ascalculated and disclosed above. For thoseplans, the value of the pension funds andbalance sheet accruals exceeded the actu-arially computed value of vested benefits asof January 1, 1980, as estimated by consult-ing actuaries.

35

Notes to Consolidated Financial Statements (continued)

10. Income Taxes. The components of incomebefore income taxes consisted of the follow-ing (in thousands):

YEAR ENDED DECEMBER 31

United StatesForeign

1980