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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:

Bryant Park Financial Communications and Wintergreen Advisers Win PRWeek Award for Best Financial Communications Program

March 25, 2015

NEW YORK--(BUSINESS WIRE)--Bryant Park Financial Communications and Wintergreen Advisers were awarded the prize for the best Investor/Financial Communications Campaign at the 2015 PRWeek Awards on March 19 in New York City. The award recognized their work to win changes in Coca-Cola's equity compensation plan.

Bill McBride, Managing Partner of BPFC, said: "We're deeply grateful for this recognition by our peers. Our thanks go to David Winters and Liz Cohernour of Wintergreen for the opportunity to work with them on a campaign devoted to important principles of fairness and equity in the world of business and finance."

David Winters, CEO of Wintergreen Advisers, said: "The award affirms the important role played by the media and investor community in spurring change at Coca-Cola, and of course the real winners are not just Wintergreen's clients but all Coke shareholders. The team at Bryant Park has been a great partner with us on this journey, and we are honored to share this recognition with them."

Each year the PRWeek awards recognize outstanding achievement in communications. More information about the award for Best Investor/Financial Communications Campaign of 2015 can be found here: http://www.prweek.com/article/1338006/investor-financial-communications-campaign-year-2015

About Bryant Park Financial Communications

Bryant Park Financial Communications provides senior-level, hands-on communications expertise to clients seeking to strengthen their companies' competitive position, drive growth and protect their reputations. For more information visit: www.bryantparkfc.com.

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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?

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 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.


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.


David J. Winters, CFA
Wintergreen Advisers, LLC

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