Welcome to the Wintergreen Advisers, LLC. website   |   Click here to visit WintergreenFund.com

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.

Click here to view the report:
How the Votes of Big Index Funds
Feed CEO Greed and Put Americans'
Retirement Savings in Peril

For more information about this report, click here.

Current Wintergreen Advisers News:

Liz Cohernour Discusses the Outcome of Consolidated-Tomoka's 2016 Proxy Vote with The Deal's Alicia McElhaney

April 28, 2016

Following Consolidated-Tomoka's Annual Meeting of Shareholders on April 27, 2016, Wintergreen's Liz Cohernour discusses how the votes cast by CTO shareholders have sent a "clear message to the board" by voting against two proposals, and supporting the proposal for CTO to hire an independent adviser to evaluate ways to maximize shareholder value.


Back to Top

 

Wintergreen Advisers, LLC to Oppose Consolidated-Tomoka Land Co. Proposed Share Issuance that It Believes Could Dilute Current Holders by 23%, and Support Proposal to Hire Independent Advisor to Maximize Shareholder Value

Wintergreen Advisers also Files 13D Indicating 26% Deemed Beneficial Ownership of Consolidated-Tomoka Land Co.

April 7, 2016

MOUNTAIN LAKES, NJ - Wintergreen Advisers, LLC ("Wintergreen" or "the Firm") today announced that it intends to vote against certain proxy items proposed by Consolidated-Tomoka Land Co. ("CTO" or "the Company", NYSE: CTO), including the Item 5 proposal to issue additional shares of common stock. According to Wintergreen's analysis of CTO's proxy statement, Wintergreen believes this issuance, if fully exercised, could dilute existing CTO shareholders to the tune of more than 23%. Accordingly, the Firm believes that this proposal is destructive to the interests of CTO shareholders and it plans on voting no to Item 5.

To help illustrate what this dilution means for a shareholder of CTO, if this proposal passes and the Company issues the full amount of the requested shares, a shareholder who owns $1,000 worth of stock would be diluted such that the value of the shares immediately after the additional stock is issued, would be $765.

In a letter filed with the Securities and Exchange Commission ("SEC"), Wintergreen indicated it will support the Wintergreen proposal to request that CTO hire an independent adviser to evaluate ways to maximize shareholder value. Wintergreen believes that shares of CTO are extremely undervalued and that substantial value is available to be unlocked quickly. Wintergreen believes an independent third party would accelerate this process by assisting CTO's Board of Directors (the "Board") in identifying viable opportunities to maximize shareholder value. The letter is included below.

In its letter, Wintergreen also indicated that it plans to vote against the following Board sponsored proposals:
- Against the re-election of each director
- Against the ratification of the appointment of Grant Thornton, LLP as auditor
- Against the advisory vote to approve executive compensation

Wintergreen's Schedule 13D, filed with the SEC, also indicates Wintergreen's 26% deemed beneficial ownership of CTO as of April 6, 2016. To view the SEC filing, click here.

Wintergreen believes these items are not in the best interest of CTO shareholders, and that shareholders deserve better than this.


Wintergreen to Vote YES to Item 4
Wintergreen Proposal to Hire Independent Advisor to Maximize CTO Shareholder Value
And
Wintergreen to vote NO to Item 5
Board Proposal to Approve Issuance of Additional Shares of Common Stock

April 6, 2016

Wintergreen Advisers, LLC ("Wintergreen") supports its proposal to request that Consolidated-Tomoka Land Co. ("CTO" or "Company") hire an independent adviser to evaluate ways to maximize shareholder value. We believe that shares of CTO are extremely undervalued and that substantial value is available to be unlocked quickly. We believe an independent third party would accelerate this process by assisting CTO's board of directors (the "Board") in identifying viable opportunities to maximize shareholder value.

We plan to vote against certain other proxy items including the Board's Item 5 proposal to issue additional shares of common stock 1. According to our analysis of the proxy statement, we believe this issuance, if fully exercised, could dilute existing CTO shareholders to the tune of more than 23%. Accordingly, we believe that this proposal is destructive to the interests of CTO shareholders and we plan on voting no to Item 5, as described more fully below.

To help illustrate what this dilution means for a shareholder of CTO, if this proposal passes and the Company issues the full amount of the requested shares, a shareholder who owns $1,000 worth of stock would be diluted such that the value of the shares immediately after the additional stock is issued, would be $765.

We plan to vote against the following Board sponsored proposals:
- Against the issuance of additional shares of CTO
- Against the re-election of each director
- Against the ratification of the appointment of Grant Thornton, LLP as auditor
- Against the advisory vote to approve executive compensation

As outlined in detail below, we believe these items are not in the best interest of CTO shareholders, and that shareholders deserve better than this.

Item 1. We intend to vote against the re-election of all 7 directors.

We believe that the Board has failed to look out for the best interests of CTO shareholders. The Board's latest transgression is a proxy statement that includes a proposal to issue more than 1.3 million shares, which could by our calculations, result in dilution of over 23% for existing shareholders. We do not believe there is a beneficial reason to shareholders for this issuance and think that better financing options are clearly available. Additionally, we view the proposal to increase compensation for what we believe to be a failed management team is egregious and another indication that the Board needs to be replaced.

Further, we have reached out to the Board on multiple occasions in an attempt to work with the Board on the issues that we have identified, but we have not received a satisfactory response. In our view the Board has expressed an interest to rubber stamp management's actions and is no longer focused on its true role - to look after the interests of CTO shareholders.

Item 2. We intend to vote against the ratification of the appointment of Grant Thornton as auditor.

In a series of letters to the Board 2, we have identified what we believe to be deficiencies in CTO's publicly filed reports. We also find it alarming that over a two-year period, Grant Thornton's audit fees have doubled without a clear explanation to CTO shareholders as to why this has occurred. We believe that the engagement of a new audit firm that can undertake a thorough review of CTO's financial statements and disclosures would benefit all shareholders.

Item 3. We intend to vote against the approval of executive compensation.

We think increasing John Albright's total compensation (including stock and option awards) by over five times his 2015 compensation is reckless, destructive, and undeserved. We believe CTO's recent share price performance has been abysmal. Its -5.5% performance in 2015 fell well behind both the overall S&P 500's return of +1.4% and the REIT Index's return of +1.4% 3. With the rebound in local real estate prices, and the low interest rate environment, we believe management's actions have detracted from share performance and absolutely no increase in compensation is warranted. We also find it very curious that CTO has shifted the membership of its peer group twice in the last three years, and also uses a different listing of "peers" in CTO's investor presentations than what is contained in CTO's annual report. We think this constant shifting and misdirection has become all too commonplace for this management team and shareholders should not reward this type of behavior.

Additionally, in our view, Mr. Albright has demonstrated a pattern of taking on dangerous amounts of leverage, both with regards to CTO and his personal dealings. As detailed in the 2016 proxy, Mr. Albright beneficially owns 109,446 4 shares of CTO. However, footnote 7, in much smaller print, reveals that Mr. Albright has pledged most of these shares in a margin trading account and as security for a line of credit. We think leveraging his CTO shares is risky and if CTO's market value declines, Mr. Albright could be subject to a margin call that may force him to liquidate his CTO shares. Under Mr. Albright's leadership, CTO has also taken on what we believe to be a dangerous amount of leverage which could lead to disastrous results for CTO shareholders. As recently as 2010, the Company wrote of the risks of leverage, writing to shareholders that "...The real estate market has always been cyclical. In down markets, significant debt can severely weaken a real estate company by forcing it to sell off valuable assets at a discount..." 5 Given CTO's recent use of leverage, it seems to us that the lessons of the past have been forgotten.

Wintergreen will not support a plan to increase the compensation of Mr. Albright by more than five times his prior year's pay. Nothing we have seen from Mr. Albright justifies this increase.

Item 4. We will vote for the hiring of an independent advisor to evaluate ways to maximize shareholder value.

We are pleased that Deutsche Bank was hired to pursue the directive of our proxy proposal: to explore strategic alternatives to enhance shareholder value, including the possible liquidation of assets or the sale of the company. This is a good first step. At this point, we cannot tell precisely what instructions have been given to Deutsche Bank as investment banker advisor, nor can we know how vigorously it will be permitted by the Board to explore all meaningful strategic paths for maximizing shareholder value. That said, we believe CTO is trading at a massive discount to the value of its underlying assets and that if Deutsche Bank acts in accordance with our proposal, we think it will uncover numerous opportunities to unlock shareholder value.

We question the Company's motives for not supporting the Wintergreen Proposal. We do not believe that the continued pursuit of the Company's business plan is a viable option. We think it is time to initiate, expedite and ultimately finalize a sales process while interest rates remain low in order to take advantage of the ongoing real estate market recovery. We have heard from many other CTO shareholders who support our proposal. We believe prior and current CTO management alike has failed to enhance shareholder value beyond a slight reflection of the recovery of the real estate market and a potential sale could be the best way to unlock CTO's value.

Item 5. We will vote against the issuance of additional shares.

We believe there is absolutely no need to dilute shareholders by issuing common stock - there are several tax efficient transactions that the Company could pursue without diluting shareholders.

The Company's current obligation to bond holders is significant, approximately $75 million. To meet its payment obligations without issuing additional shares and diluting shareholders potentially by over 23%, the Company has available to it:
1. The Raleigh, North Carolina office complex, purchased in November 2015 for $42.3m 6
2. The Commercial Loan Portfolio of approximately $38.3m 7
3. The land pipeline sales of approximately $56m 8 that will be closing in the coming years
4. The approximately $8.7 million in treasury stock (subject to CTO's share price)

We believe the Company could liquidate (or, in the case of the treasury stock, sell) these assets to raise much needed cash. We believe the Company should use any excess proceeds to repay debt and begin the process of deleveraging the Company. The proceeds of the sale of the investment portfolio, which was recently liquidated at a substantial loss 9, should also be used to reduce debt in preparation for the upcoming need for cash. Between now and the bonds' 2020 conversion date, we believe there is ample opportunity for the Board to responsibly meet bond holder obligations while also addressing shareholder concerns. Wintergreen believes that potentially diluting shareholders to the tune of 23% (if the additional shares are fully issued) is NOT the preferred method for CTO to meet its obligations to bond holders.

Accordingly, Wintergreen intends to vote "AGAINST"
- Item 1: Against each of the seven directors nominated for one year terms
- Item 2: Against the ratification of the appointment of Grant Thornton, LLP as auditor
- Item 3: Against the advisory vote to approve executive compensation
- Item 5: Against the issuance of additional shares of CTO

Wintergreen intends to vote "FOR"
- Item 4: For the hiring of an independent advisor to evaluate ways to maximize shareholder value

Liz Cohernour, COO
David J. Winters, CEO

THIS IS NOT A SOLICITATION OF DIRECT OR INDIRECT AUTHORITY TO VOTE YOUR PROXY. PLEASE DO NOT SEND US YOUR PROXY CARD; WINTERGREEN ADVISERS, LLC AND ITS AFFILIATES ARE NOT ABLE TO VOTE YOUR PROXIES AND THIS COMMUNICATION DOES NOT CONTEMPLATE SUCH AN EVENT. THE INFORMATION CONTAINED HEREIN IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF CONSOLIDATED-TOMOKA LAND CO. MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN DECISIONS REGARDING CONSOLIDATED-TOMOKA LAND CO. AND ITS PROSPECTS BASED ON SUCH INVESTORS' OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. NEITHER WINTERGREEN ADVISERS, LLC, NOR ANY OF ITS AFFILIATES ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY DIRECT OR CONSEQUENTIAL LOSS HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM ANY USE OF THE INFORMATION CONTAINED HEREIN. MANY OF THE STATEMENTS IN THIS LETTER REFLECT OUR SUBJECTIVE BELIEF.

1. CTO is proposing issuing up to 1,387,860 shares. As of February 19, 2016, CTO had 5,905,313 shares outstanding.
2. Wintergreen has written to the Board on multiple occasions, including our letters dated December 17, 2015: "Wintergreen Sees Possible Securities Law Violations at CTO", January 12, 2016: "Wintergreen Cites What It Sees as Further Disclosure Failings at CTO", and February 17, 2016: "Wintergreen Pleased That CTO has hired Deutsche Bank to pursue the directive of Wintergreen's Proxy Proposal", among others.
3. Consolidated-Tomoka Land Co: Investor Presentation, March 7, 2016, page 8.
4. Consolidated-Tomoka Land Co: Definitive Proxy, March 15, 2016, page 18.
5. Consolidated-Tomoka Land Co: 10-K, 2010.
6. Consolidated-Tomoka Land Co: 8-K, November 12, 2015.
7. Consolidated-Tomoka Land Co: 10-K, March 1, 2016.
8. Consolidated-Tomoka Land Co: Investor Presentation, March 7, 2016.
9. Consolidated-Tomoka Land Co. 8-K, March 31, 2016.

---------------------------------------------------------------


About Wintergreen Advisers

Established in 2005 by Liz Cohernour and David J. Winters, Wintergreen is an independent global money manager that employs a research-driven value style in managing global securities. As of March 31, 2016, Wintergreen Advisers had approximately $710 million under management on behalf of individuals and institutions through its mutual fund and other clients, and is based in Mountain Lakes, New Jersey.

For further information on Wintergreen Advisers, please call 973-263-4500 or visit www.wintergreenadvisers.com. For information, forms and documents regarding our U.S. mutual fund, please visit www.wintergreenfund.com.


Contacts

John McInerney
Makovsky
jmcinerney@makovsky.com
212.508.9628

Wintergreen Advisers
press@wintergreen.com
973-263-4500

Back to Top

 

David Winters quoted in Bloomberg article about Coca-Cola's revamped equity compensation plan

March 10, 2016

Winters said, "Wintergreen is ecstatic that Coca-Cola finally took action on our analysis of Coke's bloated equity bonus plan," in the Bloomberg article, "Coca-Cola Cuts CEO Kent's Pay After Revamping Equity Program" by Anders Melin and Jennifer Kaplan.


Back to Top

 

Wintergreen Advisers pleased that Consolidated-Tomoka has hired Deutsche Bank to pursue the directive of Wintergreen's Proxy Proposal

February 17, 2016

New York, NY - (Business Wire) - Wintergreen Advisers, LLC ("Wintergreen") is pleased that Consolidated-Tomoka Land Co. (NYSE: CTO, "CTO") has hired Deutsche Bank to pursue the directive of Wintergreen's Proxy Proposal: to explore strategic alternatives to enhance shareholder value, including the possible liquidation of assets or the sale of the company. We believe CTO is trading at a massive discount to the value of its underlying assets and that a liquidation or substantial asset sale is in the best interests of the CTO shareholders.

We believe it is time to expedite and finalize any sales process while interest rates remain low and the ongoing real estate market recovery remains strong. We think prior and current CTO management has failed to enhance shareholder value beyond a slight reflection of the recovery of the real estate market and CTO needs strong, experienced outside advisers to point the company in a proper direction for the benefit of all shareholders.

At this point we cannot tell precisely what instructions have been given to Deutsche Bank as investment banker adviser, nor can we know how vigorously it will be permitted by CTO's Board of Directors to explore all meaningful strategic paths for maximizing shareholder value through the sales process. We would welcome CTO's support of Wintergreen's Proposal on CTO's forthcoming proxy statement.

We note that CTO also announced that its review of company activities and disclosures, conducted by CTO's Audit Committee, had not uncovered any violations of securities laws. We question this finding and reiterate that we believe CTO management has violated both the letter and the spirit of multiple laws.


Back to Top

 

Wintergreen Advisers Cites What it Sees as Further Disclosure Failings at Consolidated-Tomoka

Urges Board of Directors to expedite sale process to maximize value for shareholders

January 12, 2016

New York, NY - (Business Wire) - Wintergreen Advisers, LLC ("Wintergreen") sent the following letter to the board of Directors of Consolidated-Tomoka Land Co. (NYSE: CTO, "CTO") to draw attention to what Wintergreen believes are continuing failures by CTO to make full disclosures to its shareholders about the financial condition of the company.

The Wintergreen letter notes that CTO's recent announcement of a new share repurchase program fails to mention that the company's share count has increased since John Albright was named CEO in August 2011, depriving shareholders of the benefits typically associated with share repurchases. In fact, we believe CTO's share repurchases are being used to make stock grants to management instead of reducing CTO's share count and increasing each shareholder's equity in the company. Indeed, Mr. Albright has been granted options for 314,000 shares of CTO stock, which represent over 5% of the company's outstanding shares, since he was hired in 2011.

The Wintergreen letter adds: "We call upon the Board to expedite the sales process and maximize value for shareholders. We believe now is the time to act, while interest rates remain low and to realize the benefit of the ongoing and escalating recovery of real estate values in Daytona Beach which we believe has been the primary reason for the recent increases in CTO's share price."

---------------------------------------------------------------

January 12, 2016

Consolidated-Tomoka Land Co.
c/o William L. Olivari, Audit Committee Chairman
8 Creekview Way
Ormond Beach, FL 32174

Memorandum to: Consolidated-Tomoka Land Co. Independent Directors (the "Board")

On December 22, 2015, Consolidated-Tomoka Land Co. ("CTO" or the "Company") issued a press release that announced that the Company had completed an $8 million share repurchase program and approved a new $10 million share repurchase program. Wintergreen Advisers, LLC ("Wintergreen") believes that this release continues a pattern of misleading disclosure by CTO that fails to properly convey what is actually going on at the Company. Wintergreen believes that truly full disclosure to all shareholders would have also included the following material points:

  1. CTO's outstanding share count has increased since John Albright has been appointed CEO. According to the Company's latest Form 10-Q filing, outstanding shares have increased by over 210,000 or 3.5% since Mr. Albright was hired in August 2011 --- despite the ongoing share repurchases. The typical benefit of a share repurchase program is that the outstanding share count shrinks, increasing each shareholder's equity in the company. However, since CTO's share repurchases aren't nearly enough to offset the shares being issued by the Company since Mr. Albright was hired (between August 2011 and September 30, 2015 CTO has repurchased 100,732 shares), CTO's shareholders only see continued dilution.
  2. CTO's share counts continue to increase due in part to stock grants to management. Since he was hired in August 2011, Mr. Albright alone has been granted options for 314,000 shares of stock which represent over 5% of the Company's outstanding shares. Overall, since Mr. Albright was hired, CTO has authorized stock grants for over 430,000 shares of stock which represents over 7.3% of the Company's outstanding shares. CTO has continued to transfer company assets to what we view as an underperforming management team.
  3. CTO holds repurchased shares in treasury, instead of retiring them. We believe this shows that the Company has no intention of reducing outstanding shares and benefiting shareholders - apparently the Board's goal for buybacks is simply to have more shares available to issue to management in future grants.

Wintergreen believes that management's goal is to extend its tenure as long as possible, including by delaying the sale of the Company and its assets. The longer that management can extend the sales process, the more opportunities it will have to acquire CTO shares via stock grants that dilute every other CTO shareholder. We believe CTO's management, with the Board's approval, repeatedly puts its personal interests ahead of shareholders. We again remind the Board of its true constituency --- the Board works for shareholders and not for management. We call upon the Board to expedite the sales process and maximize value for shareholders. We believe now is the time to act, while interest rates remain low and to realize the benefit of the ongoing and escalating recovery of real estate values in Daytona Beach which we believe has been the primary reason for the recent increases in CTO's share price.

Management's pattern of communicating what we view as half-truths and misrepresentations must be immediately corrected. Shareholders deserve a full and accurate picture of the Company - not the fairy tale that management has published. For example, we believe the Company intentionally misled shareholders in its November 24, 2015 press release announcing the inclusion in the Company's proxy materials of our shareholder proposal to hire an independent adviser to evaluate the sale or liquidation of the Company. We had been in contact with the Board and management during the months preceding the submission of our shareholder proposal and had very clearly voiced our concerns about CTO's management and the change of the Company's strategic direction. Therefore, we believe that to say the Company "appreciated Wintergreen's support" when CTO management and the Board were well aware of our dissatisfaction was an attempt to intentionally mischaracterize our position in an attempt to mislead shareholders.

Wintergreen also calls upon the Board to provide detailed disclosure to all shareholders about what advisors have been hired to oversee the sales process and also the process that was undertaken to determine the independence of these advisors. For what precise reason has the advisory firm been hired? Is the focus on the best interests of shareholders or of management? Are the advisors who have been engaged to evaluate the sale of the Company also recipients of the commissions and other fall-out benefits from the Company's transactions? Further, the Company has announced almost $120 million in transactions related to income properties, loan investments, and "venture interests" for 2015. Wintergreen believes shareholders should be provided a full accounting of all commissions, brokerage fees, and any other transaction related expenses that have been incurred in conjunction with the previously referenced $120 million in transactions, along with details as to who is being paid. We would expect that the Board would have the courtesy and respect for all shareholders to provide this full disclosure ahead of the Board's January 2016 meeting so that shareholders have more complete information to evaluate management and the Board.

Recently, CTO director Jeff Fuqua stated that "the Board has been consistently and appropriately involved in the oversight of the Company's management and the review of financial disclosures". Based on the issues we have raised to the Board's attention over the past few months, including granting Mr. Albright options for over 5% of the Company's outstanding shares, possible securities law violations and what we view as grossly inadequate disclosure regarding the Company's expanded investment and derivative portfolios, we are puzzled by Mr. Fuqua's statement. It seems to us that either the Board is not receiving from management the information it needs to effectively do its job or it is rubber-stamping whatever management puts in front of it for approval. Neither option is palatable and neither sounds to us like appropriate oversight. Mr. Fuqua also indicated that the Board and management have worked together to "create significant shareholder value." Wintergreen believes that shareholders are not seeing any benefit - all we see are increased overhead and expenses, continued dilution as shares are gifted to management, and a flurry of commissions and expenses that benefit the advisors and brokers - all at the expense of shareholders.

Regards,

David J. Winters CEO                  Liz Cohernour, COO


Back to Top

 

Wintergreen Advisers Sees Possible Securities Law Violations at Consolidated-Tomoka


December 17, 2015

New York, NY - (Business Wire) - Wintergreen Advisers, LLC ("Wintergreen") today announced that it submitted the following letter to the independent directors of Consolidated-Tomoka Land Company (NYSE:CTO, "CTO"). Wintergreen believes CTO's recent public filings have not met the standards set forth in various federal securities laws. Furthermore, Wintergreen believes that CTO's management, led by John Albright, is actively trying to deceive shareholders with filings, investor presentations, and disclosures that obfuscate, confuse and hide what is really going on at CTO, including the trading of a blind pool with borrowed money. Wintergreen believes that CTO's management violated both the letter and the spirit of multiple laws, and in light of this, expects CTO's Board of Directors to conduct a thorough and independent inquiry.

---------------------------------------------------------------

December 17, 2015

Consolidated-Tomoka Land Co.
c/o William L. Olivari, Audit Committee Chairman
8 Creekview Way
Ormond Beach, FL 32174

Memorandum to: Consolidated-Tomoka Land Co. Independent Directors

Subject: Possible Violations of Federal Securities Laws

On November 13, 2015, Wintergreen Advisers, LLC sent the independent directors of Consolidated-Tomoka Land Co. ("CTO" or the "Company") a letter identifying what we view as specific examples of failure at the senior management level. We would like to reiterate those concerns and to discuss them in the context of relevant federal securities laws. We believe CTO management violated both the letter and the spirit of multiple laws, and in light of this, do not understand how CTO's board of directors ("Board") can stand by and do nothing. At the very least, we would expect the Board to conduct a thorough and independent inquiry into these matters and to publicly report its findings.

Our overall concerns relate to the requirements of the following significant federal securities laws:
  1. Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley")
  2. Securities Act of 1933 (the "Securities Act")
  3. Securities Exchange Act of 1934 (the "Exchange Act")

In total, these laws and the rules promulgated thereunder require ongoing forthright and complete disclosure of material financial and non-financial information. A company's management is primarily responsible for ensuring compliance with these laws. We believe CTO's recent public filings have not met the standards set forth in these federal securities laws and furthermore, we believe that CTO's management, led by John Albright, is actively trying to deceive shareholders with filings, investor presentations and disclosures that obfuscate, confuse and hide what is really going on at CTO.

For example, in our earlier letter to the Board, we detailed the following issues:

CTO's Use of and Disclosure Regarding Leverage

Overall, CTO's long-term debt has increased 44% in 2015 and over 135% since the beginning of 2014. This rapid increase in the use of leverage is extremely alarming to us and we believe it puts the entire Company at risk. In addition, based on CTO's most recent Form 10-Q, it appears that CTO is making long-term commitments with short-term borrowing, which exposes shareholders to interest rate risk. Furthermore, we believe CTO's disclosure with regard to its use of leverage is extremely misleading to shareholders and creates the impression that CTO's low leverage character has not changed. This obfuscation prevents shareholders from fully appreciating what we view as a substantial and radical change to CTO's business and strategy.

We believe this could create serious potential liability under Rule 10b-5 of the Exchange Act and Item 303 of Regulation S-K under the Securities Act. Rule 10b-5 makes it unlawful for any person to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. Here, in investor presentations, publicly-filed reports and statements certified by Mr. Albright, we believe CTO both mischaracterizes the degree of its use of leverage and fails to adequately disclose material details regarding this leverage. Further, Item 303 of Regulation S-K requires that a company disclose a description of any known trends or uncertainties that it reasonably expects will have a material impact on its business. Here, we believe it is clear that CTO's increased use of leverage represents a continuing trend and we question how anyone could take the view that a company which increases its leverage to such a degree would not expect that increase to have a material impact on its business. As such, we wonder why there is not significantly more disclosure in this area. It should be noted that the violation of these rules can result in civil or criminal penalties.

CTO's Calculation of Leverage

In a November presentation, CTO management chose to present leverage ratios against "Total Enterprise Value". To us, this appears to purposefully understate CTO's true use of leverage in order to justify increasing leverage. In our opinion, this is extremely dangerous and has the potential to destroy shareholder value because it prevents shareholders from adequately assessing CTO's risk profile. In fact, if measured against CTO's Equity Market Capitalization from the same presentation, CTO's leverage would be an alarming 48%, which could force CTO to sell off its most valuable assets at a steep discount if it is unable to service its debt. Although Mr. Albright recently stated that "[CTO] measures its net asset value on a regular basis and believe[s] that [CTO's] recent share price is not representative of the net asset value of the Company", we do not think this justifies creating a reference metric that, in our opinion, omits clear disclosure of CTO's dramatically increased leverage when measured against CTO's equity market capitalization.

In addition to Rule 10b-5 and Regulation S-K concerns similar to those discussed above, we believe Mark Patten's e-mail disclosure that CTO is using hypothetical metrics to measure net asset value is also material. If CTO were to include these hypothetical metrics to measure net asset value in its financial reports without certain clarifications, we believe it could violate various provisions of Sarbanes-Oxley, including Regulation G which states that a company that presents a non-GAAP financial measure is required to compare such measure with the most comparable financial measure that is calculated in accordance with GAAP. In our view, failing to provide such a comparison prevents shareholders from accurately assessing CTO's leverage. In addition, under Section 302 of Sarbanes-Oxley, the CEO and CFO of a company are required to certify that submitted reports fairly present the financial condition of the company in all material respects and that such reports do not contain any material untrue statements or material omissions and are not misleading. Further, under Section 902 of Sarbanes-Oxley, persons can be held liable for attempting or conspiring to commit violations of Sarbanes-Oxley. We believe CTO's management, including Mr. Albright, intentionally misled shareholders and hid CTO's true level of leverage by measuring CTO's leverage in such a way that, in our opinion, would not have been permissible under Sarbanes-Oxley if included in CTO's financial statements. Violations of Sarbanes-Oxley and the rules promulgated thereunder can result in fines, imprisonment, the claw back of bonuses and private causes of action under Rule 10b-5.

CTO's Securities and Derivatives Portfolios

CTO has recently dramatically expanded an investment portfolio and initiated a derivatives portfolio, with extremely limited disclosure to shareholders. For example, CTO is trading "put options . . . related to common stock investments" and these investments are priced using Level 2 inputs. These activities raise a number of questions for us, and we would have expected a high level of detail in CTO's reports to shareholders. Additionally, we believe that CTO's management is trading this blind pool with borrowed money. Unfortunately we have found CTO's disclosure around these matters woefully inadequate. According to CTO's Form 10-Q, Messrs. Albright and Patten have determined CTO is in compliance with SEC regulations, but we believe these investment activities require a higher level of disclosure. Under Item 305 of Regulation S-K, a company is required to disclose in its Form 10-Q, material qualitative and quantitative information about the market risk inherent in the financial and derivative instruments that it trades, including the primary market risk exposures and how they have changed in the past year and how they are managed. Here, we believe CTO's dearth of disclosure around these activities could give rise to violations of Item 305 of Regulation S-K, whereby CTO management has failed to disclose material information regarding investment and derivatives portfolios that are becoming a larger and larger part of CTO's business plan. In addition, this same conduct could give rise to a Rule 10b-5 violation whereby CTO and its management could be held liable for omitting to state material facts necessary in order to make the Form 10-Q not misleading.

In conclusion, we believe CTO management's pattern of apparent mistruths and misrepresentations must be immediately investigated by the Board. Not only do shareholders deserve an accurate picture of CTO's activities and financial health, the items we have detailed in this letter may represent a massive overhanging liability for CTO and its shareholders and should be addressed without delay. It is the Board's responsibility to look after the interests of its shareholders. It is of paramount importance that the Board takes a more active role in the direction and management of the company. In a recent speech, SEC Commissioner Luis Aguilar remarked "Good corporate governance also helps to remind the company's directors that they work for the company's shareholders, not for themselves, and certainly not for management." i The focus, front and center, belongs on the maximization of shareholder value. We believe the Directors need to immediately review and address the concerns that we raise in this letter. We are disappointed that the Board has not meaningfully responded to our recent letter and expected better, but we are willing to work with CTO's Board to get to the bottom of what we view as CTO management's recent failures.

Regards,

David J. Winters CEO                  Liz Cohernour, COO

i Luis A. Aguilar, SEC Commissioner, 4/21/14, Emory University School of Law.

---------------------------------------------------------------


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, 2015, Wintergreen Advisers had approximately $1 billion under management on behalf of individuals and institutions through its mutual fund and other clients, and is based in Mountain Lakes, New Jersey.

For further information on Wintergreen Advisers, please call 973-263-4500 or visit www.wintergreenadvisers.com. For information, forms and documents regarding our U.S. mutual fund, please visit www.wintergreenfund.com.


Contacts

Wintergreen Advisers
press@wintergreen.com
973-263-4500

Back to Top

 

Wintergreen Advisers urges Consolidated-Tomoka Land Co. to take steps to maximize shareholder value

Wintergreen Advisers submits shareholder proposal to hire an independent adviser to evaluate sale of the company or liquidation of its assets

November 23, 2015

Wintergreen Advisers, LLC ("Wintergreen"), today announced that it has submitted a shareholder proposal to Consolidated-Tomoka Land Company (NYSE: CTO, "CTO") recommending that the Board of Directors of CTO retain an independent financial adviser to evaluate ways to maximize shareholder value through the sale of the company or the liquidation of its assets.

Wintergreen beneficially owns 1,543,075 shares of common stock, which constitutes 26.0% of CTO's outstanding stock. Wintergreen has beneficially owned more than 10% of CTO common stock since May 2006.

In the proposal, Wintergreen Advisers said:

"We believe CTO management should focus on maximizing shareholder value either by selling CTO or liquidating CTO's assets. Daytona Beach and Volusia County's real estate values have rebounded since the financial crisis, which may present an attractive opportunity for an acquirer of CTO. Alternatively, shareholders may receive better value by receiving a cash distribution from the sale of the remainder of CTO's land and the liquidation of the income property portfolio, before a rising interest rate environment damages these holdings' value and reduces shareholder value. Shareholders have been waiting a long time; now is the time for CTO's Directors to evaluate ways to maximize shareholder value.

"In his October 27, 2015 press release, CTO's President and CEO stated: 'our recent share price is not representative of the net asset value of the company.' We agree.

"Over the past two years, CTO's management aggressively increased leverage, dramatically expanded a securities portfolio of undisclosed holdings and initiated a derivatives portfolio. General and administrative expenses have soared. The alarming increase in risk and expenses has not led to a material increase in book or market value, and clearly is not recognized through stock price appreciation. We believe the simple truth is that CTO's management team has failed, and now is the time to act.

"Therefore, we believe that the greatest value to shareholders will be realized through a thoughtful evaluation of the sale of CTO or the liquidation of CTO's assets. We believe a vote for this shareholder proposal would benefit all 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, 2015, Wintergreen Advisers had approximately $1 billion under management on behalf of individuals and institutions through its mutual fund and other clients, and is based in Mountain Lakes, New Jersey.

For further information on Wintergreen Advisers, please call 973-263-4500 or visit www.wintergreenadvisers.com. For information, forms and documents regarding our U.S. mutual fund, please visit www.wintergreenfund.com.


Contacts

Wintergreen Advisers
press@wintergreen.com
973-263-4500

Back to Top

 

David Winters appeared on Consuelo Mack WealthTrack

July 3, 2015

As investors move in droves to passive, low-cost index funds, Wintergreen Advisers CEO David Winters discusses why he thinks index funds are a dangerous market mania, akin to other market bubbles.


To view the video, please visit http://www.wintergreenfund.com.


Back to Top

 

Click here to view the report:
How the Votes of Big Index Funds
Feed CEO Greed and Put Americans'
Retirement Savings in Peril

Index Investing Puts Americans' Retirement Savings in Peril, Wintergreen Advisers Says

Wintergreen cites position concentration and passive stance on executive pay

April 30, 2015

New York, NY – (Business Wire) - The rush of money into index equity funds has ballooned into a market mania that is fueling excessive CEO compensation and putting the savings of ordinary investors at risk, according to a new report by Wintergreen Advisers that was released today.

The report noted that the massive assets of index giants Vanguard, BlackRock (NYSE: BLK) and State Street (NYSE: STT) make them the largest block of shareholders in America's largest publicly traded companies, holding an average of 16% of the shares outstanding of the top 25 companies in the S&P 500.

David Winters, CEO of Wintergreen Advisers, said: "Trillions of ordinary investors' dollars are now committed to a mechanistic strategy that day in and day out simply buys stocks without a thought for their actual underlying value. Students of market history know that index mania - like other market fads before it - will end badly.

"The sad reality is that index funds have turned ordinary investors into the pawns in a game that undermines the integrity of American markets and imposes costs on society that don't show up in index fund expense ratios. We believe that one consequence of this is that billions of dollars of value created by American companies are being diverted to a select few executives while ordinary investors, distracted by 'low fee' hype, are subjected to dangerous risk concentrations in their retirement portfolios."

Wintergreen's analysis of the voting histories of the leading S&P 500 index funds run by Vanguard, BlackRock and State Street over the past five years for the 25 largest companies in the S&P 500 found that these funds cast their votes in favor of equity compensation plans 89% of the time, and opposed executives' pay packages less than 4% of the time. They withheld or cast votes against directors a meager 4% of the time.

Liz Cohernour, COO of Wintergreen Advisers, added: "Index mania has been a boon for executives of companies in the index, whether or not these executives are delivering real shareholder value. Flows into Big Index's fund products that tend to vote with management means a significant block of the shareholders in an S&P 500 company can generally be counted on to support executive compensation packages even when shareholders are receiving meager returns."

The Wintergreen report noted that index hype creates an illusion of safety and diversification. Wintergreen believes this can lead ordinary investors to take on a dangerously high concentration of risk in their investment portfolios.

By Wintergreen's estimate, the top 25 securities by market value in the S&P 500 in 2014 contributed over 33% of the index's total return, while the top 25 securities by performance contributed 55% of the index's total return. Apple, Microsoft, Facebook and Intel alone accounted for over 20% of the total return of the S&P 500 in 2014.

Click here to view the report:
How the Votes of Big Index Funds
Feed CEO Greed and Put Americans'
Retirement Savings in Peril

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 March 31, 2015, Wintergreen Advisers had approximately $1.5 billion under management on behalf of individuals and institutions through its mutual fund and other clients, and is based in Mountain Lakes, New Jersey.

For further information on Wintergreen Advisers, please call 973-263-4500 or visit www.wintergreenadvisers.com. For information, forms and documents regarding our U.S. mutual fund, please visit www.wintergreenfund.com.

Back to Top

 

Wintergreen Advisers Comments on Shareholder Opposition to Coca-Cola's Executive Pay

April 29, 2015

NEW YORK--(BUSINESS WIRE) -- Earlier today, the Coca-Cola Company (NYSE:KO) announced preliminary results of the shareholder vote at its annual meeting, which showed that nearly 20% of the votes cast were opposed to the resolution to approve executive compensation, compared with 9% a year ago.

David J. Winters, CEO of Wintergreen Advisers, said:

"Last year, Wintergreen challenged Coca-Cola's pay practices and helped stop management's big grab for excessive compensation. It is gratifying to see that a year later even more investors have grown impatient with executive compensation that rewards failure.

"The vote should pressure the Coca-Cola board to not only reform pay practices further but to move faster on fixing Coca-Cola's business. Companies across the consumer sector are dramatically restructuring - when will Coca-Cola take the aggressive steps needed to restore profit growth?"

Back to Top

 


Scoring Coca-Cola's 2015 Proxy:
The "Big Grab" was halted, but urgent issues remain to be addressed

Wintergreen Advisers Cites Changes in Coca-Cola Proxy, But Big Issues Remain

Campaign against 'Big Grab' fostered better disclosure, but pay remains excessive; Coca-Cola strategy lacks boldness and urgency of Heinz and Kraft restructurings.

April 13, 2015

New York, NY – (Business Wire) - Wintergreen Advisers today issued a report on The Coca-Cola Company's (NYSE:KO) 2015 Proxy Statement.

David J. Winters, CEO of Wintergreen Advisers, said: "While there has been progress in some areas at Coca-Cola, the board continues to give Muhtar Kent and his team excessive rewards, and we question whether many Coca-Cola directors are able to vigorously act for all shareholders given their overlapping business interests."

"Meanwhile, Coca-Cola lags behind while other consumer brands like Heinz and Kraft pursue bold restructurings. Coca-Cola's board and management lack a sense of urgency to address Coca-Cola's problems and increase shareholder value. There are three big questions around Coca-Cola," Winters said:

  • "What is keeping Coca-Cola from carrying out transformative strategies like those implemented at Heinz and planned for Kraft?"
  • "Why does this management continue to receive excessive compensation while missing the performance targets set by the board?"
  • "When will the board act to correct this situation?"

Liz Cohernour, Chief Operating Officer of Wintergreen, said: "Wintergreen plans to vote against Coca-Cola's directors because we believe they have not exhibited the leadership and independence needed to restore shareholder confidence and return the company to profitable growth. We urge Coca-Cola shareholders to carefully consider these issues."

The report notes that a year ago Wintergreen brought attention to what it saw as serious pay and governance problems at The Coca-Cola Company, beginning with a proposed equity compensation plan it called "Coke's Big Grab" for its potential for whopping payouts to management. Coca-Cola later said it would curtail the plan.

This year, the Wintergreen report notes, Coca-Cola's proxy statement contains better disclosure than a year ago regarding the value of equity incentive compensation and required performance hurdles for management. Importantly, it shows Coca-Cola did not issue secret bonus shares - the much-criticized stock awards granted without criteria. However, the proxy statement shows Coca-Cola is falling short in other important areas.

Wintergreen believes the Coca-Cola 2015 Proxy Statement:

  • Contains a misleading characterization of CEO Muhtar Kent's pay. Coca-Cola's proxy statement says Muhtar Kent "respectfully declined" his annual incentive award, suggesting he took a meaningful pay cut. In fact, the board increased his stock and option awards, making his total pay about even with 2014.
  • Shows missed performance targets that were apparently overlooked when awarding pay for top managers. Coca-Cola managers failed to meet two out of three of their annual performance targets, and met only the very bottom end of the third.
  • Lowers performance hurdles for management in 2015 versus 2014. Coca-Cola's management not only failed to meet its performance targets in 2014, but the 2015 proxy shows the Coca-Cola board has lowered the 2015 performance bar for the coming year, making it easier for management to earn their annual bonuses.
  • Understates the dilutive effect of Coca-Cola's equity compensation awards. Coca-Cola touts a figure of "$4.2 billion in gross share repurchases" on two different locations in their 2015 proxy statement, when in fact, net of dilution from equity compensation, buybacks were only $2.6 billion in 2014. Similarly, the company says it repurchased 98 million shares in 2014, but its shares outstanding only declined by 36 million because of the dilutive effects of equity compensation.
  • Raises questions about the directors' ability to be forceful advocates for all shareholders. Many board members have overlapping business interests, and several have business ties with investment bank Allen & Co. - whose CEO is Coca-Cola director Herbert Allen. Wintergreen believes these business ties can make the board an insular club rather than a vigilant protector of shareholders' interests.

Scoring Coca-Cola's 2015 Proxy:
The "Big Grab" was halted, but urgent issues remain to be addressed

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 March 31, 2015, Wintergreen Advisers had approximately $1.5 billion under management on behalf of individuals and institutions through its mutual fund and other clients, and is based in Mountain Lakes, New Jersey.

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.

Back to Top

 

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.

Sincerely,

Wintergreen Advisers, LLC

Back to Top

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.

Back to Top

 

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.

Back to Top

 

Wintergreen Advisers, LLC. | 333 Route 46 West, Suite 204 | Mountain Lakes, NJ 07046 | Privacy Policy