Coca Cola 2003 Annual Report Download - page 37

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Net Operating Revenues
Net operating revenues increased by $1,480 million in 2003 versus 2002. Net operating revenues increased
by $2,019 million in 2002 versus 2001.
The following table indicates, on a percentage basis, the estimated impact of key factors resulting in
significant increases (decreases) in net operating revenues:
Year Ended December 31, 2003 vs. 2002 2002 vs. 2001
Increase in gallon sales, including acquisitions 3% 5%
Structural changes (1) 6
Price and product/geographic mix 1 3
Impact of currency fluctuations versus the U.S. dollar 5 (2)
Total percentage increase 8% 12%
The increase in gallon sales in 2003 included the favorable impact of the consolidation of full year results in
2003 for 2002 acquisitions. In the second quarter of 2002, our Company entered into a long-term license
agreement involving Seagram’s mixers, a carbonated line of drinks. In the third quarter of 2002, our Company
and Danone Waters of North America (‘‘DWNA’’) formed a new joint venture company, CCDA Waters, L.L.C.
(‘‘CCDA’’) for the production, marketing and distribution of DWNA’s bottled spring and source water business
in the United States. We own a controlling 51 percent interest in the joint venture company, with a license for
the use of the Dannon and Sparkletts brands, as well as ownership of several value brands. Also in the third
quarter of 2002, we entered into a master distribution agreement for the Evian water brand in the United States
and Canada. Gallons shipped in 2003 increased when compared to 2002 as a result of owning and operating
these businesses throughout 2003 compared to only owning and operating them for a portion of 2002.
‘‘Structural changes’’ refer to acquisitions or dispositions of bottling or canning operations. Structural
changes had a negative impact in 2003 due partially to the deconsolidation of Cosmos Bottling Corporation
(‘‘CBC’’) during the second quarter of 2003. This negative impact was partially offset by the inclusion of one
additional month of revenue from CCEAG. CCEAG was consolidated in February 2002; therefore, the 2002
period contained only 11 months of CCEAG revenues versus the full year in 2003.
Effective October 1, 2003, the Company and all our bottling partners in Japan completed a structural
change that created a nationally integrated supply chain management company to centralize procurement,
production and logistics operations for the entire Coca-Cola system in Japan. As a result of the creation of this
supply chain management company in Japan, a portion of our Company’s business has essentially been
converted from a finished product business model to a concentrate business model. This shift of certain products
to a concentrate business model resulted in a reduction of revenues and cost of goods sold, each in the same
amount ($282 million), thus having no impact on our Company’s gross profit or operating income. The
formation of this entity included the sale of Company inventory and the leasing of certain Company assets to this
new entity on October 1, 2003, as well as our recording of a liability for certain contractual obligations to
Japanese bottlers. Such amounts were not material to the Company’s results of operations. We expect that both
net operating revenues and cost of goods sold will be reduced by approximately $750 million for the nine months
ending September 30, 2004 compared to the same period of 2003.
The timing of acquisitions and structural changes does not occur consistently from period to period. As a
result, anticipating the impact of such transactions on future increases or decreases in net operating revenues
(and other financial statement line items) usually is not possible. However, we expect to continue to sell bottling
interests and buy bottling interests in limited circumstances, and as a result, we will continue to have structural
impacts to our financial statements in future periods.
The impact of the weaker U.S. dollar in 2003 was driven primarily by the stronger euro that favorably
impacted the Europe, Eurasia and Middle East operating segment and the stronger yen that favorably impacted
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