Coca Cola 2005 Annual Report Download - page 54

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 the 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 line item equity income—net.
Other Loss—Net
Other loss—net amounted to a net loss of $93 million for 2005 compared to a net loss of $82 million for
2004. This line item in 2005 primarily consisted of $23 million in foreign currency exchange losses, the accretion
of $60 million for the discounted value of our liability to purchase CCEAG shares (refer to Note 7 of Notes to
Consolidated Financial Statements) and the minority shareowners’ proportional share of net income of certain
consolidated subsidiaries.
Other loss—net amounted to a net loss of $82 million for 2004 compared to a net loss of $138 million for
2003, a difference of $56 million. Approximately $37 million of this difference is related to a reduction in foreign
exchange losses. This line item in 2004 primarily consisted of foreign exchange losses of approximately
$39 million, the accretion of $58 million for the discounted value of our liability to purchase CCEAG shares
(refer to Note 7 of Notes to Consolidated Financial Statements) and the minority shareowners’ proportional
share of net income on certain consolidated subsidiaries.
Gains on Issuances of Stock by Equity Method Investees
When one of our equity method investees issues additional shares to third parties, our percentage
ownership interest in the investee decreases. In the event the issuance price per share is higher or lower than our
average carrying amount per share, we recognize a noncash gain or loss on the issuance, when appropriate. This
noncash gain or loss, net of any deferred taxes, is recognized in our net income in the period the change of
ownership interest occurs.
In 2005, our Company recorded approximately $23 million of noncash pretax gains on the issuances of stock
by equity method investees. The issuances primarily related to Coca-Cola Amatil’s issuance of common stock in
connection with the acquisition of SPC Ardmona Pty. Ltd., an Australian packaged fruit company. These
issuances of common stock reduced our ownership interest in the total outstanding shares of Coca-Cola Amatil
from approximately 34 percent to approximately 32 percent.
In 2004, our Company recorded approximately $24 million of noncash pretax gains due to the issuances of
stock by CCE. The issuances primarily related to the exercise of CCE stock options by CCE employees at
amounts greater than the book value per share of our investment in CCE. These issuances of stock reduced our
ownership interest in the total outstanding shares of CCE common stock from approximately 37 percent to
approximately 36 percent.
In 2003, our Company recorded approximately $8 million of noncash pretax gains on issuances of stock by
equity method investees. These gains primarily related to the issuance by CCE of common stock valued at an
amount greater than the book value per share of our investment in CCE. These issuances of stock reduced our
ownership interest in the total outstanding shares of CCE common stock by less than 1 percent.
Income Taxes
Our effective tax rate reflects tax benefits derived from significant operations outside the United States,
which are generally taxed at rates lower than the U.S. statutory rate of 35 percent.
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