Coca Cola 2003 Annual Report Download - page 70

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 2: BOTTLING INVESTMENTS (Continued)
In connection with the merger, Coca-Cola FEMSA management initiated steps to streamline and integrate
operations. This process included the closing of various distribution centers and manufacturing plants.
Furthermore, due to the challenging economic conditions and an uncertain political situation in Venezuela,
certain intangible assets were determined to be impaired and written down to their fair market value. During
2003, our Company recorded a noncash charge of $102 million primarily related to our proportionate share of
these matters. This charge is included in the line item equity income—net.
In December 2003, the Company issued a stand-by line of credit to Coca-Cola FEMSA. Refer to Note 11.
The Company and the major share owner of Coca-Cola FEMSA have an understanding that will permit this
share owner to purchase from our Company an amount of Coca-Cola FEMSA shares sufficient for this share
owner to regain a 51 percent ownership interest in Coca-Cola FEMSA. Pursuant to this understanding, which is
in place until May 2006, this share owner would pay the higher of the prevailing market price per share at the
time of the sale or the sum of approximately $2.22 per share plus the Company’s carrying costs. Both amounts
are in excess of our Company’s carrying value.
In July 2003, we made a convertible loan of approximately $133 million to The Coca-Cola Bottling
Company of Egypt (‘‘TCCBCE’’). The loan is convertible into preferred shares of TCCBCE upon receipt of
governmental approvals. Additionally, upon certain defaults under either the loan agreement or the terms of the
preferred shares, we have the ability to convert the loan or the preferred shares into common shares. At
December 31, 2003, our Company owned approximately 42 percent of the common shares of TCCBCE.
Effective October 1, 2003, the Company and all of its bottling partners in Japan 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, thus reducing our net operating revenues and cost of goods sold. The
formation of this entity included the sale of Company inventory and 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.
In November 2003, Coca-Cola Hellenic Bottling Company S.A. (‘‘CCHBC’’) approved a share capital
reduction totaling approximately 473 million euros and the return of 2 euros per share to all share owners. In
December 2003, our Company received our share capital return payment from CCHBC equivalent to
$136 million, and we recorded a reduction to our investment in CCHBC.
Effective February 2002, our Company acquired control of Coca-Cola Erfrischungsgetraenke AG
(‘‘CCEAG’’), the largest bottler of our Company’s beverage products in Germany. Prior to acquiring control,
our Company accounted for CCEAG under the equity method of accounting. Refer to Note 18.
In the first quarter of 2002, our Company sold our bottling operations in the Baltics to CCHBC. The
proceeds from the sale of the Baltics bottlers were approximately equal to the carrying value of the investment.
In February 2001, the Company reached an agreement with Carlsberg A/S (‘‘Carlsberg’’) for the dissolution
of Coca-Cola Nordic Beverages A/S (‘‘CCNB’’), a joint venture bottler in which our Company had a 49 percent
ownership interest. In July 2001, our Company and San Miguel Corporation (‘‘San Miguel’’) acquired Coca-Cola
Bottlers Philippines, Inc. (‘‘CCBPI’’) from Coca-Cola Amatil Limited (‘‘Coca-Cola Amatil’’). Refer to Note 18.
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