Coca Cola 2005 Annual Report Download - page 53

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Middle East operating segment and $67 million for the Corporate operating segment. Refer to Note 18 of
Notes to Consolidated Financial Statements.
• In 2003, operating income of the European Union operating segment significantly increased due to
innovation and strong marketing strategies, rigorous cost management, positive currency trends and
favorable weather during the summer months.
• As a result of the Company’s receipt of a settlement related to a vitamin antitrust litigation matter
operating income in 2003 increased by approximately $52 million for Corporate. Refer to Note 17 of
Notes to Consolidated Financial Statements.
Interest Income and Interest Expense
We monitor our mix of fixed-rate and variable-rate debt as well as our mix of 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 interest rates on U.S. dollar denominated deposits. Interest
expense in 2005 increased by $44 million compared to 2004, primarily due to higher average interest rates on
commercial paper borrowings in the United States, partially offset by lower interest expense at CCEAG due to
the repayment of current maturities of long-term debt in 2005.
In 2004, interest income decreased by $19 million compared to 2003, primarily due to lower interest income
earned on short-term investments and interest income in 2003 related to certain tax receivables. While our
Company’s average short-term investment balances increased during 2004, significant amounts of these balances
were held in lower interest-earning locations than in prior years while the Company analyzed the impact of the
Jobs Creation Act. Interest expense in 2004 increased by $18 million compared to 2003, primarily as a result of
higher average interest rates and higher average balances on commercial paper borrowings in the United States.
Equity Income—Net
Our Company’s share of income from equity method investments for 2005 totaled $680 million compared to
$621 million in 2004, an increase of approximately $59 million or 10 percent, primarily due to the overall
improving health of the Coca-Cola bottling system in most of the world and the joint acquisition of Multon in
April 2005. The increase was offset by approximately $33 million related to our proportionate share of certain
charges recorded by CCE. These charges included approximately $51 million, primarily related to the tax
liability resulting from the repatriation of previously unremitted foreign earnings under the Jobs Creation Act,
and approximately $18 million due to restructuring charges recorded by CCE. These charges were offset by
approximately $37 million from CCE’s high fructose corn syrup lawsuit settlement and changes in certain of
CCE’s state and provincial tax rates.
Our Company’s share of income from equity method investments for 2004 totaled $621 million compared to
$406 million in 2003, an increase of $215 million or 53 percent. Equity income for 2004 benefited by
approximately $37 million from our proportionate share of a favorable tax settlement related to Coca-Cola
FEMSA. Additionally, our equity income for 2003 was negatively impacted by a $102 million charge primarily
related to Coca-Cola FEMSA, as described below. Comparing 2004 to 2003, our equity income also benefited
from favorable pricing at key bottling operations, the positive impact of the strength of most key currencies
versus the U.S. dollar, especially a stronger euro, and the overall improving health of the Coca-Cola bottling
system in most of the world.
Effective May 6, 2003, one of our Company’s Latin American equity method investees, Coca-Cola FEMSA,
consummated a merger with another of the Company’s Latin American equity method investees, Panamerican
Beverages, Inc. (‘‘Panamco’’). Our Company received new Coca-Cola FEMSA shares in exchange for all the
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