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Wintergreen Advisers – Your Home for Global Value®

Established in 2005, Wintergreen is an independent global money manager based in Mountain Lakes, New Jersey. Wintergreen employs a research-driven value style in managing global securities. The firm was founded by David J. Winters, who has 30 years of experience in investment advisory services, including management of registered investment companies. David Winters is the firm’s Chief Executive Officer. Wintergreen Adviser’s co-founder is Liz Cohernour, who has over 30 years’ experience in investment advisory business and is the firm’s Chief Operating Officer. All client assets are managed on a discretionary basis. The Adviser does not manage separate accounts.

Current Wintergreen Advisers News:

David Winters discusses Coca-Cola's secret “bonus shares” with Maria Bartiromo on Fox Business

February 6, 2015

David Winters talks to Maria Bartiromo about the letter that Wintergreen Advisers sent to The Coca-Cola Company on February 3, 2015, regarding Coca-Cola’s secret “bonus shares.” Winters said, “Only in a document, which wasn't mailed to shareholders, is there a mention of shares that they can issue with no criteria, in an unlimited amount.”

Wintergreen Advisers Poses Questions for Coca-Cola

February 9, 2015 3:00 PM Eastern Standard Time

  1. On the December 15, 2014 modeling call with analysts, Coca-Cola CFO Kathy Waller acknowledged that Coca-Cola’s 2010 $13 billion acquisition of the North American bottling assets of Coca-Cola Enterprises will apparently result in a zero percent return, at best, over nearly a decade. We think this is a shockingly bad investment. Who is being held accountable?
  2. During the fourth quarter of 2014, there were reports in the media that a large buyout firm, 3G Capital, potentially had its sights on Coca-Cola. Coke shares traded sharply higher following the report. Has Coca-Cola been approached by 3G or any other parties regarding a strategic transaction?
  3. In early January 2015, Coca-Cola announced the company would lay off 1,800 employees. How many senior management positions are being eliminated as part of these firings? What is the company’s projected cash and pension expense for severance and other restructuring costs this year?
  4. How many secret bonus shares have been granted under Article 13 of the 2014 Equity Compensation Plan without regard to meeting performance hurdles?
  5. In recent years, Coca-Cola’s spending on share repurchases, capital expenditures, and dividends have outpaced its cash flow, and Coca-Cola has borrowed to bridge the gap. How much longer can Coca-Cola continue to spin the financial plates like this? What is the risk of a downgraded credit rating?
  6. Has Coca-Cola examined its real estate portfolio to see what assets are excess and should be sold? For example, the seemingly incredibly valuable 711 5th Ave in New York City seems to be an unproductive use of assets and long overdue for rationalization.
  7. ith the upcoming nationwide introduction of Fairlife milk product, what gives Coca-Cola confidence that moving into a new market and spending significant amounts of money on branding is a productive use of company cash?
  8. What is the company’s plan for succession following the exit of Muhtar Kent, who we believe has made material misstatements to shareholders and overseen an extended period of poor corporate performance? Will Coca-Cola look outside of its broken system for best-in-class succession candidates?

Wintergreen Faults Coca-Cola for Failure to Adequately Disclose Secret Bonus Shares

February 3, 2015 4:30 PM Eastern Standard Time

NEW YORK--(BUSINESS WIRE)--Wintergreen Advisers LLC said today that the Board of Directors of the Coca-Cola Company (NYSE: KO) failed to protect shareholders’ interests by introducing secret “bonus shares” for top management as part of Coca-Cola’s 2014 Equity Compensation Plan.

In a letter to the Coca-Cola Board released today, Wintergreen said it believes Coca-Cola’s 2014 Proxy Statement did not adequately identify and explain the concept of secret bonus shares, and as a result, it believes the disclosure in the 2014 Proxy Statement regarding the secret bonus shares fell far short of both the spirit and the letter of the federal securities laws governing proxy disclosure.

Wintergreen called on Coca-Cola to immediately claw back any secret bonus shares that have been granted and to pledge that none will be issued in the future. Wintergreen also requested the resignation of all board members, management and consultants or advisers who assisted in the 2014 Equity Plan debacle.


Board of Directors
The Coca-Cola Company
One Coca-Cola Plaza
Atlanta, GA 30313

January 29, 2015

RE: Secret Bonus Shares

To the Board of Directors of The Coca-Cola Company:
Wintergreen Advisers takes seriously its responsibility to safeguard the interests of its clients. That is why we have spoken out about the issues at The Coca-Cola Company, where investment funds we advise have been committed, long-term shareholders. We have been sharply critical of Coca-Cola’s poor performance, excessive pay practices and weak governance because they harm all Coca-Cola shareholders. Yet Coca-Cola’s management and Board of Directors have failed to address these problems. As a result, we feel we have no choice but to continue to bring important facts to light in the hope that real change will come to Coca-Cola.

One area in which we believe the Board failed utterly to protect shareholders’ interests is the introduction of secret “bonus shares.” Although Coca-Cola’s 2014 Proxy Statement contained only one ambiguous reference to these secret bonus shares, under the 2014 Equity Compensation Plan, Coca-Cola’s Compensation Committee may award secret unrestricted bonus shares that are not tied to any performance goals. We believe:

  • The ability to award secret bonus shares absent any specific criteria is a dramatic and material departure from Coca-Cola’s past practices of paying for performance and is also at odds with descriptions of the 2014 Equity Plan by Coca-Cola’s officers and directors.
  • More seriously, the lack of any detail regarding these secret bonus shares in Coca-Cola’s 2014 Proxy Statement fell far short of what is required under federal securities laws because shareholders could have read the 2014 Proxy Statement and still not have known that the Compensation Committee could award secret bonus shares.
The Ability to Award Secret Bonus Shares is a Material Departure From Past Pay Practices

Prior to the effectiveness of the 2014 Equity Plan, Coca-Cola’s most recent stock award plan was adopted in 2008. In Coca-Cola’s 2008 Proxy Statement, there are numerous references to a pay-for-performance approach. Indeed, the very first two sentences of the Section discussing compensation are “We pay for performance. By this, we mean that rewards are not paid when results are not delivered.” In contrast, the 2014 Equity Plan allows Coca-Cola’s Compensation Committee to grant stock awards on any basis it deems appropriate. We believe this overreaching discretion permitting the issuance of secret bonus shares is a material departure from Coca-Cola’s past pay practices.

Coca-Cola’s 2014 Proxy Statement Did Not Adequately Disclose the Concept of Secret Bonus Shares

We believe Coca-Cola’s 2014 Proxy Statement did not adequately identify and explain the concept of secret bonus shares and failed to communicate that these unrestricted awards were not part of the 2008 Plan. In fact, the only reference to secret bonus shares in the 2014 Proxy Statement appears on page 87, when discussing the types of awards that may be granted under the plan: “…other stock-based awards, in the discretion of the Compensation Committee, including unrestricted stock grants.” [Emphasis ours]. It is far from clear to us what the term “unrestricted” means in this context. We think a shareholder could closely read the 2014 Proxy Statement and still not realize that the Compensation Committee could award secret bonus shares. In fact, shareholders would have to venture all the way to page 14 of the 2014 Equity Plan Agreement itself to fully appreciate the vast discretion afforded to the Board under the 2014 Equity Plan. Unlike the Proxy Statement, which was mailed to all shareholders, the 2014 Equity Plan Agreement was only sent upon request. We think disclosure regarding such an important and novel aspect of Coca-Cola’s compensation practices should have been presented to shareholders front and center, not buried in a supplemental document that most shareholders would not read. As a result, we believe the disclosure in the 2014 Proxy Statement regarding the secret bonus shares fell far short of both the spirit and the letter of the federal securities laws governing proxy disclosure.   The blame for this falls solely on Coca-Cola’s Board of Directors, who designed the Plan, unanimously supported the Plan, and signed off on the disclosure regarding the Plan in the 2014 Proxy Statement.

Coca-Cola Officers and Directors Have Made and Continue to Make Potentially Misleading Statements Regarding the 2014 Equity Plan

We believe Coca-Cola officers and directors made public statements during the proxy solicitation period regarding the 2014 Equity Plan that were inaccurate at best, and potentially materially misleading. Specifically,

  • Mel Lagomasino, the Chair of Coca-Cola’s Compensation Committee, stated in April 2014 that the 2014 Equity Plan “does not result in changes to our pay practices – the 2014 Equity Plan is closely in line with past plans approved by the Board and the shareowners. The second point is that we firmly believe that equity compensation is performance-based. If the Company does not perform, compensation is not realized.” [Emphasis ours]
  • Coca-Cola Chairman and CEO Muhtar Kent stated in April 2014 that “Our new equity program that we have proposed to our shareholders in this coming month in April is completely in line with previous equity programs.” [Emphasis ours]

We believe these statements are simply not true. The new plan has a highly significant element that was not part of the prior plan, namely, secret bonus shares. Further, if Coca-Cola intends to use equity compensation solely to award performance, why did the Board find it necessary to include the secret bonus shares feature?

Equally troubling to us is that Coca-Cola has doubled down on what we believe to be its mischaracterizations of the 2014 Equity Plan. On January 15, 2015, longtime Coca-Cola Director Barry Diller stated in an interview that Coca-Cola intended to issue award shares under the 2014 Equity Plan over a period of ten to twenty years. We believe Mr. Diller is demonstrably wrong as the 2014 Proxy Statement is extremely clear on this point: “Based on historical granting practices and the recent trading price of the Common Stock, the 2014 Equity Plan is expected to cover awards for approximately four years.” No other time frame is discussed in the 2014 Proxy Statement and there is no additional language suggesting a time frame for the plan greater than four years. In addition, the plan itself has a maximum term of ten years, so it is illogical to contend that Coca-Cola intended to grant awards for twenty years.

Mr. Diller also stated that Coca-Cola should have better explained the 2014 Equity Plan, and this is one point we can all agree on. When a shareholder could closely read a company’s proxy statement and not know about a key and new feature of the company’s equity compensation plan, that is a communication issue at best and a deliberate obfuscation of the plan at worst. We wonder which applies to Coca-Cola.

Our Recommendations

We believe investors should have been told in plain terms in the 2014 Proxy Statement as well as in the company’s officers’ and directors’ public statements that the 2014 Equity Plan departed in material respects from previous plans. This would have allowed investors to determine whether the introduction of unrestricted secret bonus shares was consistent with Coca-Cola’s professed policy of linking awards to performance goals that are aligned with the interests of the company and shareholders. As Securities and Exchange Commissioner Luis A. Aguilar told the students and faculty of the Emory School of Law on April 21, 2014: “The underlying corporate governance issue regarding executive compensation is not simply about the amount of the compensation—but whether the decision-making process enables accountability through transparency and through shareholder engagement. To that end, it is important to have corporate governance practices that foster these principles, and that fully and fairly explain the compensation process to shareholders.” In our view, Coca-Cola has failed the tests for transparency and accountability in its communications regarding the 2014 Equity Plan.

To remedy the situation, we urge the Board to:

  1. Withdraw the 2014 Equity Plan, on the basis that a material feature was not adequately disclosed to shareholders in the 2014 Proxy Statement.
  2. Disclose if, when, to whom and how many secret bonus shares have been granted and the rationale for the award. Any such secret bonus shares should be clawed back, to the extent possible, and Coca-Cola should pledge that it will not issue any secret bonus shares in the future.
  3. Represent that future compensation plans will not allow for compensation that is not tied to performance.
  4. Review the 2014 Proxy Statement in light of Coca-Cola’s disclosure policies and present a report of its findings to shareholders.
  5. Request the resignation of all board members, management and consultants or advisers who assisted in the 2014 Equity Plan debacle.

Over the past nine months, we have raised a number of issues at Coca-Cola that go beyond just the 2014 Equity Plan, including what we view as stagnant performance and ineffective governance. However, we feel it is important to address this issue of secret bonus shares again as it epitomizes all of the problems we see at Coca-Cola: overreach and greed at a time of flat performance and a lack of accountability by the Board when it comes to standing up for shareholders. Let there be no doubt – we think the Coca-Cola Board of Directors bears full responsibility for what we view as the serious problems with the 2014 Equity Plan and the far-from-adequate disclosure regarding the 2014 Equity Plan. However, the problems at Coca-Cola go beyond the issues we have outlined in this letter. We believe there is a worrisome pattern of subterfuge, backtracking and changes of direction. The willingness to confer excessive rewards on an underperforming and undeserving management team is a symptom of deeper problems in the leadership of Coca-Cola, a great American institution. Ultimately, if the Directors will not protect Coca-Cola shareholders, then Coca-Cola shareholders will need to protect themselves.

Sincerely,

Wintergreen Advisers, LLC

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Barry Diller Said What?

January 16, 2015

Yesterday, Coca-Cola director Barry Diller attempted to offer an explanation for the controversy over Coke’s equity compensation plan. He says shareholders didn’t read the fine print. The trouble is that his explanation does not square with the facts.

Here’s what Mr. Diller said when asked about the Coke equity plan on CNBC’s “Squawk Box” yesterday:

  • “It’s weird. What happened is that Coca-Cola had a compensation plan that had been in place for a very long time. They had to renew the plan. The rules said that they had to say that X number of shares would be given over a four-year period, right? Coca-Cola had no intention of giving them over a four-year period. They were going to give them over at least ten and maybe a twenty year period. But if you took the four-year period and didn’t read underneath it and understand it, that it wasn’t an obligation, you would have said Coke was giving away all this stuff to employees and looting shareholders when in fact Coke’s dilution is under 1% which is standard for companies, etc. It was all blown to hell. It was not, it should have been better explained, and Coke learned a lesson. It should have explained it in more detail at the outset.”

Here’s what Coke’s 2014 Proxy Statement actually says:

  • “Based on historical granting practices and the recent trading price of the Common Stock, the 2014 Plan is expected to cover awards for approximately four years.” (pg. 85)
  • “Approving the 2014 Plan would [allow] the Company to continue to grant long-term equity compensation for approximately four years.” (pg. 84)

It’s troubling that Mr. Diller – who has been on the Coke board for 13 years and is a member of its Corporate Governance committee - apparently doesn’t understand what the 2014 Proxy Statement actually said.

We would agree with him about one thing, though: Coke should have explained its equity compensation plan better. Of course, had Coke done so, even more shareholders might have agreed with us (and with Warren Buffett, on behalf of Coke’s largest shareholder) that the equity compensation plan was excessive.

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Atlanta Business Chronicle: Viewpoint – Firing workers won’t restore growth at Coca-Cola

January 8, 2015

On January 8, 2015, David Winters contributed the following op-ed to the Atlanta Business Chronicle regarding the recently announced firings at The Coca-Cola Company.

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Coca-Cola’s Fizzy Math:
How Bad Performance, Excessive Pay and Weak Governance are Harming Shareholders

Wintergreen Advisers Issues Analysis of Coca-Cola

Report says shares deeply discounted because of poor management and governance

December 15, 2014

New York, NY – (Business Wire) - Wintergreen Advisers today issued a report on the Coca-Cola Company (NYSE:KO) and called for forceful action to revitalize the company.

David J. Winters, CEO of Wintergreen Advisers, said: “Coca-Cola has serious problems but we believe they can be fixed. With the right management and a commitment to serving shareholders, we think Coca-Cola can thrive again.”

The report includes the following conclusions by Wintergreen:

  • Pay for Coke’s top management has been excessive in light of the company’s performance. Annual equity grants to top management have risen steadily over the past four years while Coke’s profit growth has stalled.
  • Rather than putting a brake on pay, Coca-Cola’s equity stewardship guidelines could continue to reward Coke’s top managers unjustly, and the guidelines’ emphasis on cash bonuses could cost shareholders as much as $10.20 of per-share value.
  • Coke has been routinely outspending its cash flow in recent years and funding the gap with debt. Additional spending on executive bonuses and severance charges threatens to make this problem even worse. We believe excessive pay practices combined with slowing profit growth could threaten Coke’s 50-year record of dividend increases. Even today, Coke has a dividend-coverage ratio of just 1.4x, compared to an average of 5.0x for its peers in the S&P 500.
  • The strategic investments made by CEO Muhtar Kent have destroyed shareholder value. His blunders on failed acquisitions alone have cost shareholders $16.3 billion. He is incapable of leading Coke’s turnaround and should be replaced.
  • The recent election of two new directors to the Coca-Cola Board is a welcome sign of progress, yet we believe more needs to be done. Indeed, Coca-Cola’s Board has Directors who, in our view, have served for too long. Three members of the board have served for a combined 102 years. We believe such long tenures can make the board an insular club rather than a vigilant protector of shareholders’ interests.

Wintergreen estimates that the discount placed on Coke’s shares because of these issues is between $30 and $38 per share. Removing these discounts would put Coke’s share price at $74 to $82 per share, in line with the $90 per share Nomura Securities analyst Ian Shackleton believes Coke shares could be worth in an LBO scenario.

Wintergreen believes resolving Coke’s issues is relatively easy and straightforward – get rid of bad compensation plans, bring in new and more capable management, get expenses and overhead under control, and replace the board with a shareholder-focused board.


Coca-Cola’s Fizzy Math:
How Bad Performance, Excessive Pay and Weak Governance are Harming Shareholders

About Wintergreen Advisers

Established in 2005, Wintergreen is an independent global money manager that employs a research-driven value style in managing global securities. As of September 30, 2014, Wintergreen Advisers had approximately $2.0 billion under management on behalf of individuals and institutions through its mutual fund and other clients, and is based in Mountain Lakes, New Jersey. Wintergreen’s clients own over 2.5 million shares of The Coca-Cola Company, and have owned Coca-Cola shares for over five years.

For further information on Wintergreen Advisers, please call 973-263-4500 or visit www.wintergreenadvisers.com. Additional information regarding what we view as the issues at The Coca-Cola Company may be found at www.FixBigSoda.com. For information, forms and documents regarding our U.S. mutual fund, please visit www.wintergreenfund.com.


  1. Source: Nomura Securities, October 29, 2014 report

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Cash Matters: Why Coke’s Equity Plan Is
Still Bad For Shareholders

November 11, 2014

When the Coca-Cola Company (NYSE: KO) on October 1, 2014 announced the adoption of Equity Stewardship Guidelines for the company’s existing 2014 Equity Compensation Plan, we were cautiously optimistic that Coca-Cola’s Board of Directors had made changes to the Plan to address the concerns expressed by Wintergreen Advisers and certain Coca-Cola shareholders. 

But after looking closely at the Guidelines and studying Coca-Cola’s public statements, we’ve concluded that there has been no significant change. In fact, we believe the Guidelines could actually make the Plan worse for Coca-Cola shareholders. Under the Guidelines, certain top Coca-Cola managers will be paid in cash instead of stock which could potentially put the company’s dividend at risk.

Still a Wildly Excessive Plan

When Coca-Cola announced the adoption of the Guidelines, the head of Coca-Cola’s Compensation Committee said that “we are not changing or reducing eligibility for long-term awards.”  The Guidelines simply call for top management to receive fewer stock options and much more cash and full-value equity awards than they might otherwise have received under the Plan as originally conceived. Coca-Cola’s Guidelines do not reduce by one cent the amount that will be paid out of shareholders’ pockets to the top 5% of management who are eligible for the Plan.

When it was up for shareholder approval, the Plan was criticized for being excessive and oversized, and the Guidelines have done nothing to rein in its excessiveness or reduce its size.   Management remains eligible for “bonus shares” that can be awarded without criteria. There still is no cap on total stock awards to any individual.  We believe the Plan remains wildly excessive.

Coca-Cola’s Board of Directors seems to be attempting to distract shareholders by issuing Guidelines that appear to address the problems with the Plan, but which in reality do nothing at all. Coca-Cola is simply reshuffling the deck and shareholders are still getting a bad deal.

Creating New Problems for Shareholders

In our view, the Guidelines not only fail to address the original problems with the Plan, but they raise problems of their own.  To meet the Guidelines, Coca-Cola will massively increase the amount of cash compensation handed out to top management over the next 10 years in addition to shares and options issued under the Plan.  The result for Coca-Cola shareholders will be both dilution (from the shares and options issued) and reduced earnings (from the increased cash compensation expense).  We believe the excessive Plan and the appalling Guidelines are a lose-lose situation for all Coca-Cola shareholders.

By our estimate, it appears that the cash compensation required to meet the Guidelines will cost shareholders between $1 billion and $3 billion per year in excessive management compensation.  That is cash that comes directly out of shareholders’ pockets and reduces Coca-Cola’s earnings by a proportionate amount.  After taxes, that $1 billion to $3 billion per year is worth between $0.17 and $0.51 in annual per share net income, assuming a 25% corporate tax rateAt Coca-Cola’s current valuation of 20x earnings, that excessive cash compensation costs shareholders between $3.40 and $10.20 of per share value.

Putting the Dividend at Risk

Coca-Cola recently lowered its earnings outlook and Chairman and CEO Muhtar Kent acknowledged that it “will take time to implement and deliver improvement in our results.”  But any improvement in Coca-Cola’s performance will be impeded by the negative effect of what we view as the excessive dilution and massive cash payouts that will be made to management, both of which impact Coca-Cola’s ability to grow earnings per share.  If Coca-Cola is unable to grow earnings per share, the dividend growth that shareholders have come to expect after 50 consecutive years of increases will be put at risk. 

Coca-Cola’s dividend coverage ratio currently stands at only 1.6x, before considering the negative impact of increased cash compensation to the top 5% of management.  We believe it is incredibly imprudent behavior by the Board of Directors to put shareholders’ dividends at risk in order to increase compensation to what we view as an already overpaid management team. 

It is the fiduciary responsibility of all Board members to put the shareholders’ interests ahead of those of management. It is becoming apparent to us that the current Board is not meeting that responsibility.  If this Board cannot take steps to restore trust and revitalize the company, it should be replaced.

Sincerely,

David J. Winters, CFA
CEO
Wintergreen Advisers, LLC

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Wintergreen Advisers Poses Twelve Urgent Questions for Coca-Cola


Wintergreen calls for answers on company’s operations, costs and governance

October 20, 2014 12:00 PM Eastern Daylight Time

New York, NY – (Business Wire) - As The Coca-Cola Company (NYSE: KO) prepares to announce its third-quarter 2014 financial results on October 21, Wintergreen Advisers today released a list of twelve questions for the company to address during its conference call with investors.

Wintergreen urges Coca-Cola to provide detailed information in three critical areas – restructuring its bottling operations, streamlining expenses, and improving accountability.

David J. Winters, CEO of Wintergreen Advisers, said: “Coca-Cola is not making sufficient progress on cutting costs, a major initiative – restructuring its vast bottling network – is cloaked in secrecy, and those responsible for the company’s 2014 equity compensation plan are still at their posts. This situation cannot continue. It is time for Coca-Cola to get serious about revitalizing its business, and it can start by providing information about these issues.”


Wintergreen’s questions are:

    Restructuring Coca-Cola’s Bottling Operations

  1. Why is there not more robust financial disclosure regarding Coca-Cola Refreshments (CCR), its North American bottling and distribution segment? Coke needs to provide more detailed disclosure regarding CCR so that all investors may determine whether or not the $12+ billion purchase of Coca-Cola Enterprises North American business, the predecessor to CCR, has been a productive use of shareholder cash.
  2. Fixing up CCR and refranchising bottling operations was touted as a four-year process when the business was created in 2010. We are approaching five years - where do we stand on refranchising?
  3. Why haven’t investors seen specific plans for refranchising company owned bottlers outside the U.S. in countries such as China, Germany and India, among others?
  4. Streamlining Expenses

  5. Coke has recently announced a $1 billion cost savings and productivity initiative. For a company with a nearly $200 billion market capitalization, $1 billion of cost cutting initiatives appears to be an uninspiring goal. Many analysts have suggested $3 billion to $5 billion in potential annual savings is realistic – why is Coke not aiming for these higher targets?
  6. Why does the Coke system need nearly 100 manufacturing plants in the U.S. when Anheuser-Busch InBev, a company of comparable size and scale, requires only a dozen?
  7. At a time of what we view as sluggish growth and lackluster results, why is Coke spending $100+ million on a major renovation of its Atlanta headquarters? We believe Coke should be downsizing and cutting expenses, not further bloating the corporate structure.
  8. Coke’s selling, general, and administrative expenses as a percentage of sales is far higher than almost all consumer packaged goods peers, even after adjusting for advertising spending. Why? What specific steps are being taken to make the company more efficient? When will Coke’s antiquated supply chain be restructured and modernized?
  9. Coke’s revenue per employee is far below many of its consumer packaged goods peers. Why? What specific steps is Coke taking to streamline the company?
  10. Strengthening Accountability

  11. When can Coke’s shareholders expect to see some board members held accountable for the 2014 Equity Compensation Plan debacle?
  12. What are the criteria for invoking a clawback on bonuses and options related to past poor deals such as Glaceau and potentially CCE North America?
  13. What role did Muhtar Kent have in structuring the 2014 Equity Compensation Plan in both its original and revised format? Why is the CEO, who likely stands to benefit more than anyone from this compensation plan, involved at all in structuring it?
  14. The Coca-Coca Company, which mixes and distributes a simple product based on a largely unchanged, 19th-century formula, would appear to be able to be capably managed by a newly graduated MBA student. So why then is the Coca-Cola board so generously rewarding a management team that we believe has failed to be good stewards of the business, refuses to be accountable for past mistakes and, in soliciting shareholders’ votes, has presented misleading information?

 

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David Winters discusses Coca-Cola's compensation plan changes with Maria Bartiromo on Fox Business

October 2, 2014

David Winters discusses why he is not satisfied with the changes announced by Coca-Cola for their 2014 equity compensation plan. Winters said, "We're thrilled that Coca-Cola has acknowledged and conceded that what they did was wrong. And now, there is an opportunity for further progress at Coca-Cola."

 

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David Winters appeared on CNBC to discuss why more changes are needed at Coca-Cola

October 1, 2014

David Winters discusses ongoing issues at Coca-Cola with CNBC's Scott Wapner, Kayla Tausche, and Josh Brown. Regarding Coca-Cola's decision to revise their equity compensation plan, Winters said, "It is a move in the right direction. It is Coca-Cola's public admission that the plan was a bad plan, and what they have told shareholders over the last many months was incorrect."

 

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Wintergreen Advisers responds to Coca-Cola’s statement regarding new Equity Stewardship Guidelines

October 1, 2014 12:25 PM Eastern Daylight Time

New York, NY – (Business Wire) - Wintergreen Advisers today released the following statement by David Winters:

“Coca-Cola (NYSE: KO) has finally conceded that the equity compensation plan it put to a vote of shareholders in April was outrageously excessive and inconsistent with past plans. This has been Wintergreen Advisers’ publicly expressed view since we first read Coca-Cola’s proxy statement in March of this year. No amount of backtracking by the Coca-Cola board of directors can hide the fact that we believe it tried to sneak one by shareholders in Coca-Cola’s proxy materials and statements at the April shareholder meeting. Today's statement by Coca-Cola only calls into question the competence and leadership of the board of directors and management. Much more work has to be done to revitalize Coca-Cola and restore trust in the company.”

 

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Wintergreen Advisers Renews Call for Withdrawal
of Coca-Cola Equity Plan


Move comes as several leading fund managers disclose votes against the plan

September 15, 2014 12:00 PM Eastern Daylight Time

New York, NY – (Business Wire) - Wintergreen Advisers today renewed its call for The Coca-Cola Company (NYSE: KO) to withdraw its 2014 Equity Plan in light of new disclosures about significant shareholder opposition to the plan.

As recently reported in the media, several of Coca-Cola’s largest shareholders did not support the plan, according to proxy-voting records filed with the SEC. Those filings show that funds managed by State Street, Fidelity and Capital Group voted against the Plan.

Opposition by these funds is in addition to public pension funds that also voted against the plan, including the Florida State Board of Administration, State of Wisconsin Investment Board, Ontario Municipal Employees’ Retirement System, Ontario Teachers’ Pension Plan, and Canada Pension Plan Investment Board.

David Winters, CEO of Wintergreen Advisers, said: “When large shareholders reject your plan, a responsible company should take pause. And while the public is only now learning of these votes, the Coca-Cola board has known about the level of opposition to the plan for months. These new proxy voting disclosures – taken with the decision by Coca-Cola’s largest shareholder, Berkshire Hathaway (NYSE: BRK.A, BRK.B), to abstain from voting – suggest the Chairwoman of Coca-Cola’s compensation committee should never have said the plan had ‘broad-based investor support.’

“In our view, Coca-Cola’s plan does not have sufficient investor support to justify its implementation, and the board should do the right thing and set it aside without further delay. This is a test of whether the Coca-Cola board truly is prepared to act in the interests of shareholders. If it is not, the board should be replaced.”

While the Coca-Cola 2014 Equity Plan was approved by a majority of the votes cast, fewer than half of Coca-Cola’s total outstanding shares (2.19 billion out of 4.41 billion) were voted in favor of the plan. By contrast, 66% of the total outstanding shares were voted in favor of Coca-Cola's previous equity plan in 2008

 

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David Winters discusses issues at Coca-Cola on CNBC

September 18, 2014

David Winters discusses issues at Coca-Cola and Berkshire Hathaway with Kelly Evans on CNBC’s Closing Bell.They also discuss Canadian Natural Resources, Union Pacific, Genting and Swatch.

 

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Wintergreen Advisers Renews Call for Withdrawal
of Coca-Cola Equity Plan


Move comes as several leading fund managers disclose votes against the plan

September 15, 2014 12:00 PM Eastern Daylight Time

New York, NY – (Business Wire) - Wintergreen Advisers today renewed its call for The Coca-Cola Company (NYSE: KO) to withdraw its 2014 Equity Plan in light of new disclosures about significant shareholder opposition to the plan.

As recently reported in the media, several of Coca-Cola’s largest shareholders did not support the plan, according to proxy-voting records filed with the SEC. Those filings show that funds managed by State Street, Fidelity and Capital Group voted against the Plan.

Opposition by these funds is in addition to public pension funds that also voted against the plan, including the Florida State Board of Administration, State of Wisconsin Investment Board, Ontario Municipal Employees’ Retirement System, Ontario Teachers’ Pension Plan, and Canada Pension Plan Investment Board.

David Winters, CEO of Wintergreen Advisers, said: “When large shareholders reject your plan, a responsible company should take pause. And while the public is only now learning of these votes, the Coca-Cola board has known about the level of opposition to the plan for months. These new proxy voting disclosures – taken with the decision by Coca-Cola’s largest shareholder, Berkshire Hathaway (NYSE: BRK.A, BRK.B), to abstain from voting – suggest the Chairwoman of Coca-Cola’s compensation committee should never have said the plan had ‘broad-based investor support.’

“In our view, Coca-Cola’s plan does not have sufficient investor support to justify its implementation, and the board should do the right thing and set it aside without further delay. This is a test of whether the Coca-Cola board truly is prepared to act in the interests of shareholders. If it is not, the board should be replaced.”

While the Coca-Cola 2014 Equity Plan was approved by a majority of the votes cast, fewer than half of Coca-Cola’s total outstanding shares (2.19 billion out of 4.41 billion) were voted in favor of the plan. By contrast, 66% of the total outstanding shares were voted in favor of Coca-Cola's previous equity plan in 2008

 

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David Winters discusses issues at Coca-Cola with
the New York Times

September 9, 2014

David Winters discusses the lack of shareholder support for The Coca-Cola Company’s 2014 equity plan with Andrew Ross Sorkin for the New York Times article, “Support in Coca-Cola Vote Depends on How the Math Is Done.”

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Wintergreen Advisers Announces www.FixBigSoda.com and Outlines Steps to Revitalize Coca-Cola

July 23, 2014 03:46 PM Eastern Daylight Time

NEW YORK — July 23, 2014 (Business Wire) — Citing persistent weakness in revenue and net income at The Coca-Cola Company (NYSE: KO), Wintergreen Advisers today presented an eleven-point plan to revitalize the company.

The Wintergreen plan was shared in early July with Coca-Cola’s largest shareholders and is available today to the public on a new website, www.FixBigSoda.com, devoted to sharing information on improving Coke’s governance and business performance.

Wintergreen recommends that Coca-Cola cut costs, improve margins and step up the pace of bottler refranchising to significantly improve operating results. Wintergreen’s plan also calls for Coca-Cola to strengthen its corporate governance, improve disclosure, separate the roles of chairman and CEO and create a strong and independent Board of Directors.

David Winters, CEO of Wintergreen Advisers, said: “Coca-Cola’s lackluster second quarter earnings report underscores the need for urgent action. If the current board of directors and management team are unwilling or unable to get Coca-Cola back on the path of profitable and organic growth that accrues to all shareholders, they should be replaced. Coca-Cola and its shareholders deserve nothing less.”


July 8, 2014

Dear fellow Coca-Cola shareholders,

Over the past few years, Coca-Cola has simply not lived up to its potential. Revenue has been flat and net income before extraordinary items was lower in 2013 than in 2011, despite massive spending on marketing and several cost cutting initiatives.¹ At the same time, Coca-Cola’s debt has increased by $8.5 billion.² Furthermore, the pace at which Coca-Cola has fixed-up and refranchised its bottlers has been frustratingly slow, and disclosure on the performance of the bottling assets has been less than clear. All of these factors lead us to believe that Coca-Cola could be better managed.

We believe Coca-Cola’s shareholders deserve better, so we asked ourselves – “What would Coca-Cola look like if it were a well-run company with a focus on shareholder returns?” Here’s our answer:

Operations and integrity:

  • Best in class profit margins. Coca-Cola’s profit margin has been stuck at 26% for the past three years.³ By contrast AB InBev and SABMiller, both beverage companies with global footprints and sizes comparable to Coca-Cola’s, have profit margins of 40% and 34% respectively.⁴ In our opinion, there is no reason why Coca-Cola shouldn’t have profit margins comparable to these companies. If Coca-Cola achieved a profit margin of 37% (the average of AB InBev and SABMiller), its profits would be 41% higher. Assuming Coca-Cola continued to trade at its current valuation, the shares would be worth substantially more than their recent price of $42 per share.
  • A laser-like focus on costs. In just ten years, Coca-Cola's workforce has grown from 49,000 employees to 131,000 employees, while profit per employee has declined by 32% over that same period.⁵ We believe that Coca-Cola could be more efficient and that certain significant cost-cutting measures could be taken to boost profits per employee without harming the company.
  • An increased pace of bottler refranchising. It has been nearly four years since Coca-Cola purchased Coca-Cola Enterprises’ North American operations and since that time, little progress has been made in refranchising those bottling assets. Capital should be freed up from these operations and redeployed into the more profitable and less capital-intensive concentrate business, or returned to shareholders.
  • Improved disclosure. Investors should be able to see exactly how the bottling business is performing as a standalone business unit. Coca-Cola’s current disclosure is insufficient for this purpose.
  • Prioritizing pricing and profit over volume growth. Coca-Cola management has seemingly emphasized growing volumes in mature markets such as the United States rather than focusing on prices and profits. At the end of the day, it is profits that matter to shareholders, not volume.
  • No more attempts to buy growth. Paying large valuations for stakes in non-core businesses such as Keurig Green Mountain Inc. does not address the fundamental growth problems Coca-Cola has encountered in its primary business of selling cold beverages. Management’s focus should be improving its time-tested and highly profitable business lines rather than trying to buy growth.
  • No more cheapening Coca-Cola’s brands. Mixing apple and grape juice with 0.3% pomegranate juice and labeling it as pomegranate juice reflects poorly on the entire company and management. We believe that the United States Supreme Court's recent unanimous decision related to a lawsuit against Coca-Cola for its allegedly misleading labeling of pomegranate juice is indicative of larger problems with management’s focus, integrity and judgment.

Corporate Governance

  • Separate the roles of Chairman and CEO. Currently, Mr. Muhtar Kent serves as both the Chairman and CEO of Coca-Cola. Having an independent Chairman is a widely accepted best-practice for large, blue chip companies because it reduces certain conflicts of interests and helps to prevent management overreach. Coca-Cola should be a leader in corporate governance practices, and we believe the first step is having an independent Chairman.
  • Withdraw and replace the 2014 Equity Compensation Plan. We believe the Plan is overly-dilutive and harmful to shareholders and to Coca-Cola. It should be withdrawn and replaced with a more modest plan which includes clear and meaningful performance hurdles which must be cleared before any bonuses are paid and include an emphasis on cash awards. All details of any compensation plan should be contained within the proxy statement itself, not in supplemental filings, and should be presented in a clear and concise manner. Coca-Cola’s shareowners should be able to understand exactly what they are being asked to vote for without referencing several documents spread over several dozen of pages. For a complete picture regarding the 2014 Equity Plan, investors need to reference the proxy statement, a supplemental filing, and Coca-Cola’s 10-k.
  • Develop and implement a plan to reduce the dilutive effects of the existing 388 million equity awards.⁶ Whether through repurchasing options from employees or another mechanism, the 8.8% potential dilution from these awards needs to be addressed. The dilution overhang should be significantly reduced so that the future upside of Coca-Cola’s shares accrues to all shareholders.
  • A strong and independent Board of Directors. We question how a truly independent board could develop and unanimously approve a plan that ultimately garnered approval from less than half of Coca-Cola's total outstanding shares. An independent board's role is to stand up to management overreach and to represent the interests of the shareholders, who are the true owners of the company. At Coca-Cola, one-third of the board members have been there for more than 15 years, and many have overlapping business interests with each other and the company.⁷ Furthermore, many of the directors have little, if any, experience in the global beverage business. We believe it is time for some fresh, informed and independent perspectives in the boardroom.

Coca-Cola is a company with incredible potential around the world and some of the most valuable consumer brands ever created. Its shareholders deserve leadership that respects and honors the iconic nature of the company and is willing to do what it takes to restore Coca-Cola to the great company that we know it to be. We have outlined a few modest steps that we believe are essential to returning value to Coca-Cola. If the current board of directors and management team are unwilling or unable to get Coca-Cola back on the path of profitable and organic growth that accrues to all shareholders, they should be replaced. Coca-Cola and its shareholders deserve nothing less.

Sincerely,

David J. Winters, CEO
Wintergreen Advisers, LLC.
973-263-4500


Footnotes:

  1. Coca-Cola 2013 10-K, page 74; Coca-Cola 2011 10-K, page 78; this sentence has been corrected and updated as of July 10, 2014.
  2. Coca-Cola 2011 10-K, page 75; Coca-Cola 2013 10-K, page 76.
  3. As measured by EBITDA margin – earnings before interest, taxes, depreciation and amortization divided by net revenue.
  4. Bloomberg.
  5. Coca-Cola 2004 Annual Report page 12; 2013 Annual Report page 11; Bloomberg.
  6. Coca-Cola 2014 proxy statement, page 85.
  7. Coca-Cola 2014 proxy statement, pages 39 to 41.

 

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David Winters Q&A with Barron’s

July 7, 2014

David Winters discusses issues at Coca-Cola, why he isn’t selling Coke’s stock, and why he’s bullish on the Asian consumer, in the Barron’s article, “How a Hands-On Investor Went Flat on Coke” by Sarah Max.

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David Winters appeared on Bloomberg TV

June 18, 2014

David Winters was interviewed by Tom Keene and Scarlet Fu on Bloomberg Surveillance. They discussed value investing, speculation about Berkshire Hathaway and 3G taking Coca-Cola private, executive compensation, dividends and buybacks.

 

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