Coca Cola 2004 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Coca-Cola Company and Subsidiaries
NOTE 2: BOTTLING INVESTMENTS (Continued)
During 2004, our Company sold our bottling operations in Vietnam, Cambodia, Sri Lanka and Nepal to
Coca-Cola Sabco (Pty) Ltd. (‘‘Sabco’’) for a total consideration of $29 million. In addition, Sabco assumed
certain debts of these bottling operations. The proceeds from the sale of these bottlers were approximately equal
to the carrying value of the investment.
Effective May 6, 2003, one of our Company’s equity method investees, Coca-Cola FEMSA consummated a
merger with another of the Company’s equity method investees, Panamerican Beverages, Inc. (‘‘Panamco’’). Our
Company received new Coca-Cola FEMSA shares in exchange for all Panamco shares previously held by the
Company. Our Company’s ownership interest in Coca-Cola FEMSA increased from 30 percent to approximately
40 percent as a result of this merger. This exchange of shares was treated as a nonmonetary exchange of similar
productive assets, and no gain was recorded by our Company as a result of this merger.
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 consolidated statement of income 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 shareowner of Coca-Cola FEMSA have an understanding that will permit this
shareowner to purchase from our Company an amount of Coca-Cola FEMSA shares sufficient for this
shareowner to regain a 51 percent ownership interest in Coca-Cola FEMSA. Pursuant to this understanding,
which is in place until May 2006, this shareowner 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
resulting 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, 2004, our Company owned approximately 42 percent of the common shares of TCCBCE. In 2004,
we consolidated TCCBCE under the provisions of Interpretation 46.
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. (‘‘Coca-Cola HBC’’) approved a share
capital reduction totaling approximately 473 million euros and the return of 2 euros per share to all shareowners.
In December 2003, our Company received our share capital return payment from Coca-Cola HBC equivalent to
$136 million, and we recorded a reduction to our investment in Coca-Cola HBC.
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