Coca Cola 2003 Annual Report Download - page 68

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 2: BOTTLING INVESTMENTS (Continued)
infrastructure necessary to support accelerated placements of cold-drink equipment. These payments support a
common objective of increased sales of Coca-Cola beverages from increased availability and consumption in the
cold-drink channel. In connection with these programs, CCE agrees to:
(1) purchase and place specified numbers of venders/coolers or cold-drink equipment each year through
2008;
(2) maintain the equipment in service, with certain exceptions, for a period of at least 12 years after
placement;
(3) maintain and stock the equipment in accordance with specified standards; and
(4) report to our Company minimum average annual unit case sales volume throughout the economic life
of the equipment.
CCE must achieve minimum average unit case sales volume for a 12-year period following the placement of
equipment. These minimum average unit case sales volume levels ensure adequate gross profit from sales of
concentrate to fully recover the capitalized costs plus a return on the Company’s investment. Should CCE fail to
purchase the specified numbers of venders/coolers or cold-drink equipment for any calendar year through 2008,
the parties agree to mutually develop a reasonable solution. Should no mutually agreeable solution be
developed, or in the event that CCE otherwise breaches any material obligation under the contracts and such
breach is not remedied within a stated period, then CCE would be required to repay a portion of the support
funding as determined by our Company. No repayments by CCE have ever been made under these programs.
Our Company paid or committed to pay $3 million in 2002 and $159 million in 2001 to CCE in connection with
these infrastructure programs. These payments are recorded in prepaid expenses and other assets and in
noncurrent other assets and amortized as deductions in net operating revenues over the 10-year period following
the placement of the equipment. Our carrying values for these infrastructure programs with CCE were
approximately $829 million as of December 31, 2003 and $879 million as of December 31, 2002. Effective 2002
and thereafter, the Company has no further commitments under these programs.
As of January 1, 2001, CCE changed its method of accounting for infrastructure development payments
received from the Company. Prior to this change, CCE recognized these payments as offsets to incremental
expenses of the programs in the periods in which they were incurred. CCE now recognizes the infrastructure
development payments received from the Company as income when obligations under the contracts are
performed. Because the Company eliminates the financial effect of significant intercompany transactions
(including transactions with equity method investees), this change in accounting method had no impact on the
financial statements of our Company.
In March 2003, our Company acquired a 100 percent ownership interest in Truesdale Packaging Company
LLC (‘‘Truesdale’’) from CCE. Refer to Note 18.
If valued at the December 31, 2003 quoted closing price of CCE shares, the fair value of our investment in
CCE exceeded our carrying value by approximately $2.4 billion.
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