Coca Cola 2003 Annual Report Download - page 67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 2: BOTTLING INVESTMENTS (Continued)
A summary of our significant transactions with CCE is as follows (in millions):
2003 2002 2001
Net concentrate and syrup sales to CCE $ 4,681 $ 4,306 $ 3,852
CCE purchases of sweeteners through our Company 311 325 295
Cash payments made by us directly to CCE 862 837 606
Cash payments made by us directly to CCE customers 214 204 282
Local media and marketing program reimbursements 221 264 252
Cash payments made by us directly to CCE represent support of certain marketing activities and our
participation with them in cooperative advertising and other marketing. Cash payments made by us directly to
CCE’s customers represent support of certain marketing activities and programs. Pursuant to cooperative
advertising and trade agreements with CCE, we received funds from CCE for local media and marketing
program expense reimbursements.
In 2002, our Company entered into a multi-year Sales Growth Initiative (‘‘SGI’’) agreement with CCE to
support profitable growth of our brands in its territories. Total cash support paid by our Company under the SGI
agreement was $150 million in 2002. This amount is included in the total support of certain marketing activities
and our participation with them in cooperative advertising and other marketing programs noted above.
The entire SGI agreement may be terminated by either party by providing six months written notice to the
other party; provided, however, that once an annual plan has been agreed upon by both companies, such
termination shall not be effective until the end of the applicable plan year. In addition, during the first three
quarters of any year, either party may cancel for ensuing quarters the sales volume growth targets and cash
support funding provisions of the agreement for that year by providing 10 days’ notice prior to the end of such
quarter. Upon such quarterly cancellation, all other provisions of the agreement will remain in full force and
effect. Volume growth funding is paid to CCE equally over the four quarters of the program year within 30 days
after the beginning of each quarter. Our Company recognizes a charge as sales volume growth is attained by
CCE. Such amounts are included as allowance deductions in net operating revenues.
The agreement provides for refunds of funding advances should CCE fail to attain specified minimum sales
volume growth targets. Accordingly, should CCE not attain specified minimum cumulative sales volume growth
targets in the ensuing quarters of a given year, amounts recognized to date for that year would be subject to refund.
In 2002, our Company agreed with CCE to modify the terms of the SGI agreement relating to 2003 and
beyond. Under the amended agreement, funding for 2003, anticipated to be $250 million under the original
agreement, was revised to $200 million. The 2003 amount paid to CCE was $161 million. This $39 million
difference was due to a shortfall of 39 million unit cases below the sales volume growth target for 2003. The new
amendment requires an additional $275 million in funding to CCE over the next eight years (2004–2011) and
significantly reduces the annual reductions in funding that were a part of the original agreement. In addition, the
amendment provides for each company to retain all cost savings it generates from future system efficiency
initiatives. The previous agreement called for an equal sharing between our Company and CCE of combined
proceeds above set targets.
Our Company previously entered into programs with CCE designed to help it develop cold-drink
infrastructure. Under these programs, our Company paid CCE for a portion of the cost of developing the
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