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20FEB200406462039
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-2217
(Exact name of Registrant as specified in its charter)
DELAWARE 58-0628465
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Coca-Cola Plaza
Atlanta, Georgia 30313
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (404) 676-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK, $0.25 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements
for the past 90 days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated
filer. See definition of ‘‘accelerated filer’’ or ‘‘large accelerated filer’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer
Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
The aggregate market value of the common equity held by non-affiliates of the Registrant (assuming for these
purposes, but without conceding, that all executive officers and Directors are ‘‘affiliates’’ of the Registrant) as of July 1,
2005, the last business day of the Registrant’s most recently completed second fiscal quarter, was $87,349,477,246 (based
on the closing sale price of the Registrant’s Common Stock on that date as reported on the New York Stock Exchange).
The number of shares outstanding of the Registrant’s Common Stock as of February 21, 2006 was 2,367,883,247.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s Proxy Statement for the Annual Meeting of Shareowners to be held on April 19, 2006, are
incorporated by reference in Part III.

Table of contents

  • Page 1
    ...of July 1, 2005, the last business day of the Registrant's most recently completed second fiscal quarter, was $87,349,477,246 (based on the closing sale price of the Registrant's Common Stock on that date as reported on the New York Stock Exchange). The number of shares outstanding of the Registrant...

  • Page 2
    ... Matters and Issuer Purchases Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of Operations ...Quantitative and Qualitative Disclosures About Market Risk ...Financial Statements and Supplementary Data ...Changes in and...

  • Page 3
    ... Coca-Cola Company is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world. Finished beverage products bearing our trademarks, sold in the United States since 1886, are now sold in more than 200 countries and include the leading soft drink...

  • Page 4
    ... three new operating segments: European Union; East, South Asia and Pacific Rim; and North Asia, Eurasia and Middle East. The North America operating segment included the United States, Canada and Puerto Rico. The European Union operating segment included our operations in all current member states...

  • Page 5
    ... waters and flavored waters, juice and juice drinks, sports drinks, teas and coffees; • ''Company Trademark Beverages'' means beverages bearing our trademarks and certain other beverage products licensed to us for which we provide marketing support and from the sale of which we derive net revenues...

  • Page 6
    ...Most of our revenues are based on gallon sales, a primarily ''wholesale'' activity. Unit case volume and gallon sales growth rates are not necessarily equal during any given period. Items such as seasonality, bottlers' inventory practices, supply point changes, timing of price increases, new product...

  • Page 7
    ... fountain syrups. The remaining approximately 4 percent of 2005 non-U.S. unit case volume was attributable to juice and juice-drink products. In addition to conducting our own independent advertising and marketing activities, we may provide promotional and marketing services or funds to our bottlers...

  • Page 8
    ... advertising and marketing activities. Within the United States In the United States, with certain very limited exceptions, the Bottler's Agreements for Coca-Cola Trademark Beverages and other cola-flavored beverages have no stated expiration date. Our standard contracts for other soft-drink flavors...

  • Page 9
    ... or syrups for certain Coca-Cola Trademark Beverages and other cola-flavored Company Trademark Beverages to be priced pursuant to a stated formula. Bottlers accounting for approximately 10 percent of U.S. bottle/can gallon sales in 2005 have contracts for certain Coca-Cola Trademark Beverages...

  • Page 10
    ... of the Coca-Cola system's production, distribution and marketing systems around the world. These investments are intended to result in increases in unit case volume, net revenues and profits at the bottler level, which in turn generate increased gallon sales for our Company's concentrate and syrup...

  • Page 11
    ... data and a variety of industry sources, we believe that, in 2005, worldwide sales of Company products accounted for approximately 10 percent of total worldwide sales of nonalcoholic beverage products. The nonalcoholic beverages segment of the commercial beverages industry is highly competitive...

  • Page 12
    ..., advertising, sales promotion programs, product innovation, increased efficiency in production techniques, the introduction of new packaging, new vending and dispensing equipment, and brand and trademark development and protection. Our competitive strengths include powerful brands with a high level...

  • Page 13
    ...Pursuant to our Bottler's Agreements, we authorize our bottlers to use applicable Company trademarks in connection with their manufacture, sale and distribution of Company products. In addition, we grant licenses to third parties from time to time to use certain of our trademarks in conjunction with...

  • Page 14
    ..., net income or competitive position. Employees As of December 31, 2005, our Company employed approximately 55,000 persons, compared to approximately 50,000 at the end of 2004. The increase in the number of employees was primarily due to an increase in bottling operations activity, mainly in Brazil...

  • Page 15
    ... enhancements to production facilities, distribution networks, sales equipment and technology. Moreover, the supply of our products in developing and emerging markets must match customers' demand for those products. Due to product price, limited purchasing power and cultural differences...

  • Page 16
    ... or work stoppages at any of our major manufacturing plants could impair our ability to supply concentrates and syrups to our customers, which would reduce our revenues and could expose us to customer claims. Increase in the cost of energy could affect our profitability. Our Company-owned bottling...

  • Page 17
    ... of our net revenues from sales of our products in international markets. In 2005, our operations outside of our North America operating group accounted for approximately 71 percent of our net operating revenues. Unfavorable economic and political conditions in these markets, including civil 15

  • Page 18
    ... changes in our commercial and market practices in the European Economic Area Member States. The Undertaking potentially applies in 27 countries and in all channels of distribution where our carbonated soft drinks account for over 40 percent of national sales and twice the nearest competitor's share...

  • Page 19
    ...consumer interest in certain products, we may be required from time to time to recall products entirely or from specific markets. Product recalls could affect our profitability and could negatively affect brand image. Also, adverse publicity surrounding obesity concerns, water usage, labor relations...

  • Page 20
    ... Business Park, Dunwoody, Georgia. The North America operating segment owns and occupies an office building located in Houston, Texas, that contains approximately 330,000 square feet. The Company has facilities for administrative operations, manufacturing, processing, packaging, packing, storage...

  • Page 21
    ... to the bottled water facilities mentioned above, located throughout the United States and Canada. It also utilizes a system of contract packers to produce and/or distribute certain products where appropriate. In addition, our North America operating segment owns a facility that manufactures juice...

  • Page 22
    ... purchased over $400 million of insurance coverage, of which approximately $350 million is still available to cover Aqua-Chem's costs for certain product liability and other claims. The Company sold Aqua-Chem to Lyonnaise American Holding, Inc. in 1981 under the terms of a stock sale agreement...

  • Page 23
    ... new business strategy/model, (c) the state of the Company's critical bottler relationships, (d) the Company's North American business, (e) the Company's European operations, with a particular emphasis on Germany, (f) the Company's marketing and introduction of new products, particularly Coca-Cola...

  • Page 24
    ... The Coca-Cola Company, et al. and Jackson v. The Coca-Cola Company, et al.) were filed in the United States District Court for the Northern District of Georgia by participants in the Company's Thrift & Investment Plan (the ''Plan'') alleging breach of fiduciary duties under the Employee Retirement...

  • Page 25
    ... of Missouri, Southern Division (Ozarks Coca-Cola/Dr Pepper Bottling Company, et al. v. The Coca-Cola Company and Coca-Cola Enterprises Inc.) by bottlers that collectively represented approximately 10 percent of the Company's U.S. unit case volume for 2005. The plaintiffs in these lawsuits allege...

  • Page 26
    ...of Coca-Cola Bottling of Johannesburg, the largest Coca-Cola bottler in South Africa at the time. Mr. Isdell was named Region Manager for Australia in 1980. In 1981, he became President of Coca-Cola Bottlers Philippines, Inc., the bottling joint venture between the Company and San Miguel Corporation...

  • Page 27
    ... from brand management and media relations to advertising and on-line marketing and communications. From 1995 to 2000, Mr. Mattia held a variety of executive positions with Ford Motor Company, including head of International Public Affairs, Vice President of Lincoln Mercury and Director of North...

  • Page 28
    ..., the Latin America Group and a member of the Company's Executive ´xico as Manager of Committee. He began his career with The Coca-Cola Company in 1980 at Coca-Cola de Me Strategic Planning. In 1987, he was appointed Manager of the Sprite and Diet Coke brands at Corporate Headquarters. In 1990...

  • Page 29
    ... ISSUER PURCHASES OF EQUITY SECURITIES In the United States, the Company's common stock is listed and traded on the New York Stock Exchange (the principal market for our common stock) and is traded on the Boston, Chicago, National, Pacific and Philadelphia stock exchanges. The following table sets...

  • Page 30
    ... common stock of the Company made during the three months ended December 31, 2005 by the Company or any ''affiliated purchaser'' of the Company as defined in Rule 10b-18(a)(3) under the Exchange Act. Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or...

  • Page 31
    ... contained in ''Item 8. Financial Statements and Supplementary Data'' of this report. Year Ended December 31, (In millions except per share data) 20051,2 20041,2 2003 20023,4 20015 SUMMARY OF OPERATIONS Net operating revenues Cost of goods sold Gross profit Selling, general and administrative...

  • Page 32
    ...concentrates and syrups in the world. We also manufacture, distribute and market some finished beverages. Along with Coca-Cola, which is recognized as the world's most valuable brand, we market four of the world's top five soft drink brands, including Diet Coke, Fanta and Sprite. Our Company owns or...

  • Page 33
    ... for our brands. We believe that greater awareness and preference promotes long-term growth in unit case volume, per capita consumption and our share of worldwide nonalcoholic beverage sales. The Nonalcoholic Beverages Segment of the Commercial Beverages Industry We operate in the highly competitive...

  • Page 34
    ... company in Japan and supported the creation of a bottler-owned supply chain organization in North America. By pooling the resources of bottling partners, we have reduced the costs to manufacture our products. This type of supply chain initiative is being replicated in China and Africa and a number...

  • Page 35
    ... that obesity is a complex public health problem. Our commitment to consumers begins with our broad product line, which includes a wide selection of diet and light beverages, juice and juice drinks, sports drinks and water products. Our commitment also includes adhering to responsible policies in...

  • Page 36
    ... Taxes • Contingencies Management has discussed the development, selection and disclosure of critical accounting policies and estimates with the Audit Committee of the Company's Board of Directors. While our estimates and assumptions are based on our knowledge of current events and actions we may...

  • Page 37
    ... packaging and availability of beverages in the marketplace continue to impact operating results; India, where affordability and bottler execution issues remain; and certain markets in Latin America, Asia and Africa, where local economic and political conditions are unstable. We have bottling 35

  • Page 38
    ...of our Company's investments in publicly traded companies are often readily available based on quoted market prices. For investments in nonpublicly traded companies, management's assessment of fair value is based on valuation methodologies including discounted cash flows, estimates of sales proceeds...

  • Page 39
    ... closing prices of publicly traded shares, and our Company's carrying values for significant investments in publicly traded bottlers accounted for as equity method investees (in millions): December 31, 2005 Fair Value Carrying Value Difference Coca-Cola Enterprises Inc. Coca-Cola Hellenic Bottling...

  • Page 40
    ...appropriate discount rate, based on the Company's cost of capital rate or location-specific economic factors. In 2005, our Company recorded impairment charges of approximately $84 million related to intangible assets. These intangible assets relate to trademarks for beverages sold in the Philippines...

  • Page 41
    ... market changes and determining our expectations related to the political environment. We concluded that, in order to better serve our customers and control the costs in our supply chain, we need to simplify our bottling and distribution operations in Germany and work toward a single bottler...

  • Page 42
    ... tax planning strategies. A valuation allowance is required to be established unless management determines that it is more likely than not that the Company will ultimately realize the tax benefit associated with a deferred tax asset. Additionally, undistributed earnings of a subsidiary are accounted...

  • Page 43
    ...this report and the heading ''Operations Review-Net Operating Revenues,'' below. Unit case volume and gallon sales growth rates are not necessarily equal during any given period. Items such as seasonality, bottlers' inventory practices, supply point changes, timing of price increases and new product...

  • Page 44
    ... Coca-Cola system sold approximately 20.6 billion unit cases of our products in 2005, approximately 19.8 billion unit cases in 2004, and approximately 19.4 billion unit cases in 2003. In the North America operating segment, unit case volume in the Retail Division increased 2 percent in 2005 versus...

  • Page 45
    ... water and powdered drinks in Mexico. The North Asia, Eurasia and Middle East operating segment's unit case volume increased 12 percent in 2004 compared to 2003, primarily led by 22 percent growth in China as a result of a new advertising campaign, innovative packaging and promotion in the cities...

  • Page 46
    ...the North America operating segment, gallon sales increased 1 percent while unit case volume increased 2 percent in 2005 compared to 2004, primarily due to the impact of higher gallon sales in 2004 related to the launch of Coca-Cola C2 and a change in shipping routes in 2004. In the Africa operating...

  • Page 47
    Analysis of Consolidated Statements of Income Year Ended December 31, (In millions except per share data and percentages) 2005 2004 2003 Percent Change 05 vs. 04 04 vs. 03 NET OPERATING REVENUES Cost of goods sold GROSS PROFIT GROSS PROFIT MARGIN Selling, general and administrative expenses Other ...

  • Page 48
    ...North Asia, Eurasia and Middle East operating segment. Refer to the heading ''Liquidity, Capital Resources and Financial Position-Foreign Exchange.'' Structural changes resulted in a decrease in net operating revenues in 2004 compared to 2003, primarily due to the creation of a national supply chain...

  • Page 49
    ... to a class action lawsuit settlement concerning pricefixing in the sale of high fructose corn syrup purchased by the Company during the years 1991 to 1995. Subsequent to the receipt of this settlement, the Company distributed approximately $62 million to certain bottlers in North America. From 1991...

  • Page 50
    ...bottling and finished product operations, such as our Japan tea business, which was integrated into the supply chain company, produce higher net revenues but lower gross profit margins compared to concentrate and syrup operations. Selling, General and Administrative Expenses The following table sets...

  • Page 51
    ... 18 of Notes to Consolidated Financial Statements. Operating Income and Operating Margin Information about our operating income by operating segment on a percentage basis is as follows: Year Ended December 31, 2005 2004 2003 North America Africa East, South Asia and Pacific Rim European Union Latin...

  • Page 52
    ... supply chain management company in Japan, operating margins in the North Asia, Eurasia and Middle East operating segment increased. Generally, finished product operations produce higher net revenues but lower operating margins compared to concentrate and syrup operations. Refer to the heading...

  • Page 53
    ... term debt versus non-term debt. From time to time we enter into interest rate swap agreements to manage our mix of fixed-rate and variable-rate debt. In 2005, interest income increased by $78 million compared to 2004, primarily due to higher average short-term investment balances and higher average...

  • Page 54
    ... 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 the operations. This process included the closing of various distribution centers and manufacturing plants...

  • Page 55
    ... Resources and Financial Position We believe our ability to generate cash from operating activities is one of our fundamental financial strengths. We expect cash flows from operating activities to be strong in 2006 and in future years. For the five-year period from 2006 through 2010, we currently...

  • Page 56
    ..., plant and equipment (including our investments in information technology) and the percentage of such totals by operating segment for 2005, 2004 and 2003 were as follows: Year Ended December 31, 2005 2004 2003 Capital expenditures (in millions) North America Africa East, South Asia and Pacific Rim...

  • Page 57
    ... loan of approximately $133 million to The Coca-Cola Bottling Company of Egypt (''TCCBCE'') which is included in the line item purchases of investments and other assets in our consolidated statement of cash flows. The loan is convertible into preferred shares of TCCBCE upon receipt of governmental...

  • Page 58
    ... Company. Our global presence and strong capital position give us access to key financial markets around the world, enabling us to raise funds at a low effective cost. This posture, coupled with active management of our mix of short-term and long-term debt and our mix of fixed-rate and variable-rate...

  • Page 59
    ..., our Board of Directors authorized the 1996 Plan to repurchase up to 206 million shares of our Company's common stock through 2006. The table below presents shares repurchased and average price per share under the 1996 Plan: Year Ended December 31, 2005 2004 2003 Number of shares repurchased (in...

  • Page 60
    ... current liquidity needs, especially at international subsidiaries. Refer to Note 8 of Notes to Consolidated Financial Statements for information regarding long-term debt. We will consider several alternatives to settle this long-term debt, including the use of cash flows from operating activities...

  • Page 61
    ... investment return on plan assets. Because the accrued liability does not represent expected liquidity needs, we did not include this amount in the contractual obligations table. We fund our U.S. qualified pension plans in accordance with Employee Retirement Income Security Act of 1974 regulations...

  • Page 62
    ...to Consolidated Financial Statements. The Company will continue to manage its foreign currency exposure to mitigate, over time, a portion of the impact of exchange rate changes on net income and earnings per share. Overview of Financial Position Our consolidated balance sheet as of December 31, 2005...

  • Page 63
    ... segment). Refer to the heading ''Operations Review-Other Operating Charges'' for a discussion of the impairment charges. Impact of Inflation and Changing Prices Inflation affects the way we operate in many markets around the world. In general, we believe that, over time, we are able to increase...

  • Page 64
    ... of any natural offsets. In 2005, we generated approximately 71 percent of our net operating revenues from operations outside of our North America operating group; therefore, weakness in one particular currency might be offset by strengths in others over time. We use derivative financial instruments...

  • Page 65
    ... of Cash Flows ...Consolidated Statements of Shareowners' Equity ...Notes to Consolidated Financial Statements ...Report of Management on Internal Control Over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Report of Independent Registered Public Accounting Firm...

  • Page 66
    THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, (In millions except per share data) 2005 2004 2003 NET OPERATING REVENUES Cost of goods sold GROSS PROFIT Selling, general and administrative expenses Other operating charges OPERATING INCOME Interest ...

  • Page 67
    THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, (In millions except par value) 2005 2004 ASSETS CURRENT ASSETS Cash and cash equivalents Marketable securities Trade accounts receivable, less allowances of $72 and $69, respectively Inventories Prepaid expenses and ...

  • Page 68
    THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (In millions) 2005 2004 2003 OPERATING ACTIVITIES Net income Depreciation and amortization Stock-based compensation expense Deferred income taxes Equity income or loss, net of dividends Foreign ...

  • Page 69
    THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY Year Ended December 31, (In millions except per share data) 2005 2004 2003 NUMBER OF COMMON SHARES OUTSTANDING Balance at beginning of year Stock issued to employees exercising stock options Purchases of stock for...

  • Page 70
    ... countries worldwide, we primarily sell our concentrates and syrups, as well as some finished beverages, to bottling and canning operations, distributors, fountain wholesalers and fountain retailers. We also market and distribute juice and juice drinks, sports drinks, water products, teas, coffees...

  • Page 71
    ...to maintain good relationships with our bottling partners; a deterioration in our bottling partners' financial condition; strikes or work stoppages (including at key manufacturing locations); increased cost of energy; increased cost, disruption of supply or shortage of raw materials; changes in laws...

  • Page 72
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) in which we operate; changes in accounting and taxation standards including an increase in tax rates; an inability to achieve our overall long...

  • Page 73
    ... sales of our products in international markets. Refer to Note 20. We also generate a significant portion of our net revenues by selling concentrates and syrups to bottlers in which we have a noncontrolling interest, including Coca-Cola Enterprises Inc. (''CCE''), Coca-Cola Hellenic Bottling Company...

  • Page 74
    ... distribution rights. Additionally, our Company invests in infrastructure programs with our bottlers that are directed at strengthening our bottling system and increasing unit case volume. When facts and circumstances indicate that the carrying value of the assets may not be recoverable, management...

  • Page 75
    ... term of any agreement, the history of the asset, the Company's long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset and, other economic factors, including competition and specific market conditions. Intangible assets...

  • Page 76
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Retirement-Related Benefits Using appropriate actuarial methods and assumptions, our Company accounts for defined benefit pension plans in ...

  • Page 77
    ..., ''Accounting for Stock Issued to Employees,'' and amends SFAS No. 95, ''Statement of Cash Flows.'' Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. In 2005, our Company used the Black-Scholes-Merton formula to estimate the fair value of stock options...

  • Page 78
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In 2004, our Company recorded an income tax benefit of approximately $50 million as a result of the realization of certain tax credits related...

  • Page 79
    ... FINANCIAL STATEMENTS NOTE 2: BOTTLING INVESTMENTS Coca-Cola Enterprises Inc. CCE is a marketer, producer and distributor of bottle and can nonalcoholic beverages, operating in eight countries. On December 31, 2005, our Company owned approximately 36 percent of the outstanding common stock...

  • Page 80
    ...'s North American operations, changes in executive management and elimination of certain positions in CCE's corporate headquarters. These charges were partially offset by an approximate $37 million increase to equity income in the second quarter of 2005 resulting from CCE's high fructose corn syrup...

  • Page 81
    ... 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 cold-drink equipment for any calendar year through 2010, the parties agreed to mutually develop...

  • Page 82
    ... in April 2005 jointly with Coca-Cola HBC, for a total purchase price of approximately $501 million, split equally between the Company and Coca-Cola HBC. Multon produces and distributes juice products under the DOBRIY, Rich, Nico and other trademarks in Russia, Ukraine and Belarus. Equity income-net...

  • Page 83
    ... equity income benefited by approximately $37 million for its share of a favorable tax settlement related to Coca-Cola FEMSA. In December 2004, the Company sold to an unrelated financial institution certain of its production assets that were previously leased to the Japanese supply chain management...

  • Page 84
    ... return payment from Coca-Cola HBC equivalent to $136 million, and we recorded a reduction to our investment in Coca-Cola HBC. If valued at the December 31, 2005 quoted closing prices of shares actively traded on stock markets, the value of our equity method investments in publicly traded bottlers...

  • Page 85
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4: PROPERTY, PLANT AND EQUIPMENT The following table summarizes our property, plant and equipment (in millions): December 31, 2005 2004 Land Buildings and improvements Machinery and equipment Containers ...

  • Page 86
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5: GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS (Continued) Information about estimated amortization expense for intangible assets subject to amortization for the five years succeeding December 31, 2005, is as...

  • Page 87
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5: GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS (Continued) deposit laws in Germany led to discount chains creating proprietary packages that could only be returned to their own stores. These proprietary ...

  • Page 88
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7: SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS (Continued) discussed above, the Company had $1,150 million in lines of credit for general corporate purposes, including commercial paper backup. There were no ...

  • Page 89
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9: COMPREHENSIVE INCOME Accumulated Other Comprehensive Income (Loss) (''AOCI''), including our proportionate share of equity method investees' AOCI, consisted of the following (in millions): December 31, 2005 ...

  • Page 90
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10: FINANCIAL INSTRUMENTS Certain Debt and Marketable Equity Securities Investments in debt and marketable equity securities, other than investments accounted for by the equity method, are categorized as trading, ...

  • Page 91
    ... losses on sales of available-for-sale securities were not material. The cost of securities sold is based on the specific identification method. Fair Value of Other Financial Instruments The carrying amounts of cash and cash equivalents, non-marketable cost method investments, receivables, accounts...

  • Page 92
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10: FINANCIAL INSTRUMENTS (Continued) We recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance sheets, with fair values estimated based on quoted market prices...

  • Page 93
    ...the line item other loss-net of our consolidated statements of income to offset the effect of remeasurement of the monetary assets and liabilities. The Company also enters into forward exchange contracts to hedge its net investment position in certain major currencies. Under SFAS No. 133, changes in...

  • Page 94
    ... $ 27 12 $ 39 $ 27 12 $ 39 2005 2005 The Company estimates the fair value of its foreign currency derivatives based on quoted market prices or pricing models using current market rates. These amounts are primarily reflected in prepaid expenses and other assets in our consolidated balance sheets...

  • Page 95
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11: HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS (Continued) The following table summarizes activity in AOCI related to derivatives designated as cash flow hedges held by the Company during the ...

  • Page 96
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12: COMMITMENTS AND CONTINGENCIES (Continued) The Company is involved in various legal proceedings. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable ...

  • Page 97
    ... countries and in all channels of distribution where the Company's carbonated soft drinks account for over 40 percent of national sales and twice the nearest competitor's share. The commitments the Company made in the Undertaking relate broadly to exclusivity, percentage-based purchasing commitments...

  • Page 98
    ...: NET CHANGE IN OPERATING ASSETS AND LIABILITIES Net cash provided by (used in) operating activities attributable to the net change in operating assets and liabilities is composed of the following (in millions): Year Ended December 31, 2005 2004 2003 (Increase) decrease in trade accounts receivable...

  • Page 99
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14: STOCK COMPENSATION PLANS (Continued) During 2005, the Company changed its estimated service period for retirement-eligible participants in its plans when the terms of their stock-based compensation awards ...

  • Page 100
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14: STOCK COMPENSATION PLANS (Continued) To ensure the best market-based assumptions were used to determine the estimated fair value of stock options granted in 2005, 2004 and 2003, we obtained two independent market...

  • Page 101
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14: STOCK COMPENSATION PLANS (Continued) The following awards were outstanding as of December 31, 2005: • 422,700 shares of time-based restricted stock in which the restrictions lapse upon the achievement of ...

  • Page 102
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14: STOCK COMPENSATION PLANS (Continued) Performance-Based Restricted Stock Awards In 2001, shareowners approved an amendment to the 1989 Restricted Stock Award Plan to allow for the grant of performance-based awards...

  • Page 103
    ...-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14: STOCK COMPENSATION PLANS (Continued) on the date of the grant less the present value of the expected dividends not received during the performance period. Performance share unit Target Awards for the 2004-2006, 2005...

  • Page 104
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued) Obligations and Funded Status The following table sets forth the change in benefit obligations for our benefit plans (in millions): December 31, Pension...

  • Page 105
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued) The following table sets forth the change in the fair value of plan assets for our benefit plans (in millions): December 31, Pension Benefits 2005 ...

  • Page 106
    ...used in computing net periodic benefit cost are as follows: Year Ended December 31, Pension Benefits 2005 2004 2003 Other Benefits 2005 2004 2003 Discount rate1 Rate of increase in compensation levels Expected long-term rate of return on plan assets 1 51⁄2% 6% 6% 6% 61⁄4% 61⁄2% 4% 41⁄4% 41...

  • Page 107
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued) The assumed health care cost trend rates are as follows: December 31, 2005 2004 Health care cost trend rate assumed for next year Rate to which the cost...

  • Page 108
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued) Asset allocation targets promote optimal expected return and volatility characteristics given the long-term time horizon for fulfilling the ...

  • Page 109
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued) Defined Contribution Plans Our Company sponsors a qualified defined contribution plan covering substantially all U.S. employees. Under this plan, we ...

  • Page 110
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16: INCOME TAXES (Continued) A reconciliation of the statutory U.S. federal tax rate and effective tax rates is as follows: Year Ended December 31, 2005 2004 2003 Statutory U.S. federal rate State and local ...

  • Page 111
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16: INCOME TAXES (Continued) As discussed in Note 1, the Jobs Creation Act was enacted in October 2004. One of the provisions provides a one-time benefit related to foreign tax credits generated by equity investments...

  • Page 112
    ... we distributed to certain bottlers in North America, approximately $49 million was distributed to CCE. The Company's remaining share of the settlement was approximately $47 million, which was recorded as a reduction of cost of goods sold and impacted the Corporate operating segment. During 2005, we...

  • Page 113
    ... used in the manufacture of some of the Company's products. Also in 2003, the Company received a settlement relating to this litigation of approximately $52 million, which was recorded as a reduction to cost of goods sold. Refer to Note 2 for disclosure regarding the merger of Coca-Cola FEMSA and...

  • Page 114
    ... 2003 by operating segment were as follows (in millions): North America Africa East, South Asia and Pacific Rim European Union Latin America North Asia, Eurasia and Middle East Corporate Total $ 273 12 11 157 8 33 67 $ 561 NOTE 19: ACQUISITIONS AND INVESTMENTS During 2005, our Company's acquisition...

  • Page 115
    ... not previously owned by our Company. Our Company and Danone Waters of North America, Inc. (''DWNA'') had formed CCDA in July 2002 for the production, marketing and distribution of DWNA's bottled spring and source water business in the United States. This transaction was accounted for as a business...

  • Page 116
    ... the different factors affecting financial performance. Segment income or loss includes substantially all of the segment's costs of production, distribution and administration. Our Company typically manages and evaluates equity method investments and related income on a segment level. However, we...

  • Page 117
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 20: OPERATING SEGMENTS (Continued) Information about our Company's operations by operating segment is as follows (in millions): North America Africa East, South Asia and Pacific Rim European Union Latin America North...

  • Page 118
    ... proceeds, and changes in certain of CCE's state and provincial tax rates. Refer to Note 17. Income (loss) before income taxes benefited by approximately $22 million for East, South Asia and Pacific Rim due to issuances of stock by Coca-Cola Amatil, one of our equity method investees. Refer...

  • Page 119
    ... public accounting firm, are appointed by the Audit Committee of the Company's Board of Directors, subject to ratification by our Company's shareowners. Ernst & Young LLP have audited and reported on the Consolidated Financial Statements of The Coca-Cola Company and subsidiaries, management...

  • Page 120
    ... Public Accounting Firm Board of Directors and Shareowners The Coca-Cola Company We have audited the accompanying consolidated balance sheets of The Coca-Cola Company and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareowners' equity, and cash...

  • Page 121
    ... (United States), the consolidated balance sheets of The Coca-Cola Company and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareowners' equity, and cash flows for each of the three years in the period ended December 31, 2005, and our report dated...

  • Page 122
    ... million of impairment charges primarily related to intangible assets (mainly trademark beverages sold in the Philippines market). Approximately $85 million and $4 million of these impairment charges are recorded in the line items other operating charges and equity income - net, respectively, in our...

  • Page 123
    ...income benefited by approximately $37 million for our proportionate share of a favorable tax settlement related to Coca-Cola FEMSA. Refer to Note 2. • Impairment charges totaling approximately $88 million primarily related to write-downs of certain manufacturing investments and an intangible asset...

  • Page 124
    ...not limited to, waters and flavored waters, juice and juice drinks, sports drinks, and teas and coffees. Operating Margin: operating income divided by net operating revenues. Per Capita Consumption: average number of servings consumed per person, per year in a specific market. Per capita consumption...

  • Page 125
    ... sold by the Coca-Cola system to customers. Unit case volume primarily consists of beverage products bearing Company trademarks. Unit case volume also includes sales by joint ventures in which the Company is a partner and beverage products licensed to, or distributed by, our Company, and brands...

  • Page 126
    ... Registered Public Accounting Firm on Internal Control Over Financial Reporting, included in Part II, ''Item 8. Financial Statements and Supplementary Data'' of this report. There has been no change in the Company's internal control over financial reporting during the quarter ended December 31, 2005...

  • Page 127
    ... we intend to disclose the same on the Company's website at www.coca-cola.com. On May 16, 2005, we filed with the New York Stock Exchange (''NYSE'') the Annual CEO Certification regarding the Company's compliance with the NYSE's Corporate Governance listing standards as required by Section 303A-12...

  • Page 128
    ...Exchange Commission, upon request, a copy of any instrument defining the rights of holders of long-term debt of the Company and all of its consolidated subsidiaries and unconsolidated subsidiaries for which financial statements are required to be filed with the SEC. The Key Executive Retirement Plan...

  • Page 129
    ... Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan of the Company-incorporated herein by reference to Exhibit 10.1 of the Company's Form 8-K Current Report filed April 19, 2005.* Form of Restricted Stock Agreement (Performance Share Unit Agreement...

  • Page 130
    ... Amendment Number Six to the Compensation Deferral & Investment Program of the Company, dated as of January 12, 2004, effective January 1, 2004-incorporated herein by reference to Exhibit 10.9.3 of the Company's Form 10-K Annual Report for the year ended December 31, 2003.* Executive Medical Plan of...

  • Page 131
    ..., 1999.* Letter Agreement, dated February 17, 2000, between the Company and M. Douglas Ivester-incorporated herein by reference to Exhibit 10.17.3 of the Company's Form 10-K Annual Report for the year ended December 31, 1999.* Group Long-Term Performance Incentive Plan of the Company, as amended and...

  • Page 132
    ... International Corporation, regarding consulting services to be provided by Brian G. Dyson- incorporated herein by reference to Exhibit 10.32 of the Company's Form 10-K Annual Report for the year ended December 31, 2003.* The Coca-Cola Company Benefits Plan for Members of the Board of Directors, as...

  • Page 133
    ... 31, 2004.* Employment Agreement, dated as of July 18, 2002, between The Coca-Cola Export Corporation and Alexander B. Cummings-incorporated herein by reference to Exhibit 10.46 of the Company's Form 10-K Annual Report for the year ended December 31, 2004.* Letter, dated as of April 1, 2005, from...

  • Page 134
    .... THE COCA-COLA COMPANY (Registrant) By: /s/ E. NEVILLE ISDELL E. NEVILLE ISDELL Chairman, Board of Directors, Chief Executive Officer Date: February 28, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 135
    ... February 28, 2006 * * DONALD F. MCHENRY Director February 28, 2006 PETER V. UEBERROTH Director February 28, 2006 * * SAM NUNN Director February 28, 2006 JAMES B. WILLIAMS Director February 28, 2006 * By: /s/ CAROL CROFOOT HAYES CAROL CROFOOT HAYES Attorney-in-fact February 28, 2006 133

  • Page 136
    THE COCA-COLA COMPANY AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Year Ended December 31, 2005 (in millions) COL. A COL. B Description Balance at Beginning of Period COL. C Additions Net Charges to Costs Net Charges and to Other Expenses Accounts COL. D COL. E Deductions ...

  • Page 137
    THE COCA-COLA COMPANY AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Year Ended December 31, 2004 (in millions) COL. A COL. B Description Balance at Beginning of Period COL. C Additions (1) (2) Charged Charged to Costs and to Other Expenses Accounts COL. D COL. E Deductions (...

  • Page 138
    THE COCA-COLA COMPANY AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Year Ended December 31, 2003 (in millions) COL. A COL. B Balance at Beginning of Period Description COL. C Additions Charged Charged to Costs and to Other Expenses Accounts COL. D COL. E Balance at End of ...

  • Page 139
    ... E. Neville Isdell, Chairman, Board of Directors, and Chief Executive Officer of The Coca-Cola Company, certify that: 1. 2. I have reviewed this annual report on Form 10-K of The Coca-Cola Company; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to...

  • Page 140
    ...I, Gary P. Fayard, Executive Vice President and Chief Financial Officer of The Coca-Cola Company, certify that: 1. 2. I have reviewed this annual report on Form 10-K of The Coca-Cola Company; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state...

  • Page 141
    ... annual report of The Coca-Cola Company (the ''Company'') on Form 10-K for the period ended December 31, 2005 (the ''Report''), I, E. Neville Isdell, Chairman, Board of Directors, and Chief Executive Officer of the Company and I, Gary P. Fayard, Executive Vice President and Chief Financial Officer...

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