Coca Cola 2004 Annual Report Download - page 44

transactions during 2002 resulted in an increase of approximately $43 million in selling, general and
administrative expenses as a result of including full-year expenses in 2003 compared to only a portion of 2002.
These increases were partially offset by effective management of operating expenses.
As discussed in Notes 1 and 13, effective January 1, 2002, our Company adopted the preferable fair value
recognition provisions of SFAS No. 123, ‘‘Accounting for Stock-Based Compensation,’’ and selected the modified
prospective transition method under the provisions of SFAS No. 148, ‘‘Accounting for Stock-Based
Compensation—Transition and Disclosure.’’ Prior to 2002, our Company accounted for stock-based
compensation under the recognition and measurement provisions of Accounting Principles Board Opinion
No. 25, ‘‘Accounting for Stock Issued to Employees’’ (‘‘APB No. 25’’), and related interpretations. In 2004, 2003
and 2002, stock-based compensation expense was recognized as if the fair value method of SFAS No. 123 had
been applied from its original effective date.
Other Operating Charges
The other operating charges incurred by operating segment were as follows (in millions):
Year Ended December 31, 2004 2003
North America $18 $ 273
Africa —12
Asia 15 18
Europe, Eurasia and Middle East 377 183
Latin America 620
Corporate 64 67
Total $ 480 $ 573
Other operating charges in 2004 reflected the impact of approximately $480 million of expenses primarily
related to impairment charges for franchise rights and certain manufacturing assets. The Europe, Eurasia and
Middle East operating segment accounted for approximately $377 million of the impairment charges, which were
primarily related to the impairment of franchise rights at CCEAG. For a discussion of the operating environment
in Germany, refer to the heading ‘‘Application of Critical Accounting Policies—Goodwill, Trademarks and Other
Intangible Assets.’’ The Corporate operating segment accounted for approximately $64 million of the impairment
charges, which were primarily related to the impairment of certain manufacturing assets.
Operating income in 2003 reflected the impact of approximately $561 million of expenses related to the
2003 streamlining initiatives. A majority of the charges related to initiatives in North America and Germany. In
North America, the Company integrated the operations of three separate North American business units—
Coca-Cola North America, The Minute Maid Company and Coca-Cola Fountain. In Germany, CCEAG took
steps to improve its efficiency in sales, distribution and manufacturing, and our German Division office also
implemented streamlining initiatives. Selected other operations also took steps to streamline their operations to
improve overall efficiency and effectiveness.
These initiatives resulted in the separation of approximately 3,700 associates in 2003, primarily in North
America, Germany and Asia. As a result of these streamlining initiatives, apart from the charge to 2003 earnings
of $561 million, we estimate that the Company’s financial results benefited by approximately $50 million (pretax)
in 2003 and $100 million (pretax) in 2004. Refer to Note 17.
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