Coca Cola 2005 Annual Report Download - page 80

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: BOTTLING INVESTMENTS (Continued)
payments made by us directly to CCE represent support of certain marketing activities and our participation
with CCE in cooperative advertising and other marketing activities to promote the sale of Company trademark
products within CCE territories. These programs are agreed to on an annual basis. Marketing payments made to
third parties on behalf of CCE represent support of certain marketing activities and programs to promote the
sale of Company trademark products within CCE’s territories in conjunction with certain of CCE’s customers.
Pursuant to cooperative advertising and trade agreements with CCE, we received funds from CCE for local
media and marketing program reimbursements. Payments made to CCE for dispensing equipment repair
services represent reimbursement to CCE for its costs of parts and labor for repairs on cooler, dispensing, or
post-mix equipment owned by us or our customers.
In 2005, our equity income related to CCE decreased by approximately $33 million as compared to 2004,
related to our proportionate share of certain charges and gains recorded by CCE. Our proportionate share of
CCE’s charges included an approximate $51 million decrease to equity income, primarily related to the tax
liability recorded by CCE in the fourth quarter of 2005 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 restructuring charges were primarily related to workforce reductions associated with
the reorganization of CCE’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 (‘‘HFCS’’) lawsuit settlement proceeds and changes in certain of CCE’s state and provincial tax rates.
Refer to Note 17.
In the second quarter of 2004, our Company and CCE agreed to terminate the Sales Growth Initiative
(‘‘SGI’’) agreement and certain other marketing funding programs that were previously in place. Due to
termination of these agreements, a significant portion of the cash payments to be made by us directly to CCE
was eliminated prospectively. At the termination of these agreements, we agreed that the concentrate price that
CCE pays us for sales made in the United States and Canada would be reduced. Total cash support paid by our
Company under the SGI agreement prior to its termination was approximately $58 million and approximately
$161 million for 2004 and 2003, respectively. These amounts are included in the line item marketing payments
made by us directly to CCE in the table above.
In the second quarter of 2004, our Company and CCE agreed to establish a Global Marketing Fund, under
which we expect to pay CCE $62 million annually through December 31, 2014, as support for certain marketing
activities. The term of the agreement will automatically be extended for successive 10-year periods thereafter
unless either party gives written notice of termination of this agreement. The marketing activities to be funded
under this agreement will be agreed upon each year as part of the annual joint planning process and will be
incorporated into the annual marketing plans of both companies. We paid CCE $62 million in 2005 and a pro
rata amount of $42 million for 2004. These amounts are included in the line item marketing payments made by
us directly to CCE in the table above.
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