Coca Cola 2004 Annual Report Download - page 113

Download and view the complete annual report

Please find page 113 of the 2004 Coca Cola annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 140

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 18: ACQUISITIONS AND INVESTMENTS (Continued)
shares of CCEAG. All payments related to the exercise of the put options will be made in 2006. Our Company
entered into either put or put/call agreements for shares representing approximately a 59 percent interest in
CCEAG. The spread in the strike prices of the put and call options is approximately 3 percent.
As of the date of the transaction, the Company concluded that the exercise of the put and/or call
agreements was a virtual certainty based on the minimal differences in the strike prices. We concluded that
either the holder of the put option would require the Company to purchase the shares at the agreed-upon put
strike price, or the Company would exercise its call option and require the shareowner to tender its shares at the
agreed-upon call strike price. If these puts or calls are exercised, the actual transfer of shares would not occur
until the end of the term of the CPL. Coupled with the guaranteed payments in lieu of dividends for the term of
the CPL, these instruments represented the financing vehicle for the transaction. As such, the Company
determined that the economic substance of the transaction resulted in the acquisition of the remaining
outstanding shares of CCEAG and required the Company to account for the transaction as a business
combination. Furthermore, the terms of the CPL transferred control and all of the economic risks and rewards
of CCEAG to the Company immediately.
The present value of the total amount likely to be paid by our Company to all other CCEAG shareowners,
including the put or put/call payments and the guaranteed annual payments in lieu of dividends, was
approximately $1,041 million at December 31, 2004. This amount increased from the initial liability of
approximately $600 million due to the accretion of the discounted value to the ultimate maturity of the liability,
as well as approximately $350 million of translation adjustment related to this liability. This liability is included
in the line item other liabilities. The accretion of the discounted value to its ultimate maturity value is recorded
in the line item other income (loss)—net, and this amount was approximately $58 million, $51 million and
$38 million, respectively, for the years ended December 31, 2004, 2003 and 2002.
In July 2002, our Company and Danone Waters of North America, Inc. (‘‘DWNA’’) formed a new limited
liability 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. In forming CCDA, DWNA contributed assets of
its retail bottled spring and source water business in the United States. These assets included five production
facilities, a license for the use of the Dannon and Sparkletts brands, as well as ownership of several value brands.
Our Company made a cash payment to acquire a controlling 51 percent equity interest in CCDA and is also
providing marketing, distribution and management expertise. This transaction was accounted for as a business
combination, and the consolidated results of CCDA’s operations have been included in the Company’s
consolidated financial statements since July 2002. This business combination expanded our water brands to
include a national offering in all sectors of the water category with purified, spring and source waters. CCDA is
included in our North America operating segment.
In January 2002, our Company and Coca-Cola Bottlers Philippines, Inc. (‘‘CCBPI’’) finalized the purchase
of RFM Corp.’s (‘‘RFM’’) approximate 83 percent interest in Cosmos Bottling Corporation (‘‘CBC’’), a publicly
traded Philippine beverage company. CBC is an established carbonated soft-drink business in the Philippines
and is included in our Asia operating segment. The original sale and purchase agreement with RFM was entered
into in November 2001. As of the date of this sale and purchase agreement, the Company began supplying
concentrate for this operation. The purchase of RFM’s interest was finalized on January 3, 2002. In March 2002,
a tender offer was completed with our Company and CCBPI acquiring all shares of the remaining minority
shareowners except for shares representing a 1 percent interest in CBC. This transaction was accounted for as a
business combination, and the results of CBC’s operations were included in the Company’s consolidated
financial statements from January 2002 to March 2003.
111