Coca Cola 2006 Annual Report Download - page 121

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18: SIGNIFICANT OPERATING AND NONOPERATING ITEMS (Continued)
We recorded additional impairment charges in 2004 of approximately $88 million. These impairments
primarily related to the write-downs of certain manufacturing investments and an intangible asset. As a result of
operating losses, management prepared analyses of cash flows expected to result from the use of the assets and
their eventual disposition. Because the sum of the undiscounted cash flows was less than the carrying value of
such assets, we recorded an impairment charge to reduce the carrying value of the assets to fair value. These
impairment charges were recorded in the consolidated statement of income line item other operating charges.
Also in 2004, our Company received a $75 million insurance settlement related to the class action lawsuit
that was settled in 2000. The Company donated $75 million to The Coca-Cola Foundation in 2004.
NOTE 19: ACQUISITIONS AND INVESTMENTS
In December 2006, the Company entered into a purchase agreement with San Miguel Corporation and two
of its subsidiaries (collectively, ‘‘SMC’’) to acquire all of the shares of capital stock of Coca-Cola Bottlers
Philippines, Inc. (‘‘CCBPI’’) held by SMC, representing 65 percent of all the issued and outstanding capital stock
of CCBPI. CCBPI is the Company’s authorized bottler in the Philippines. The transaction is subject to certain
conditions. Upon the closing of this transaction, the Company will own 100 percent of the issued and
outstanding capital stock of CCBPI. The total purchase price is expected to be approximately $590 million,
subject to adjustment based on the terms and conditions of the purchase agreement. The results of operations of
CCBPI will be included in our consolidated financial statements from the date of the closing.
In December 2006, the Company and Coca-Cola FEMSA entered into an agreement to jointly acquire
Jugos del Valle, S.A.B. de C.V., the second largest producer of packaged juices, nectars and fruit-flavored
beverages in Mexico and the largest producer of such beverages in Brazil. The total purchase price is expected to
be approximately $380 million in cash plus the assumption of approximately $90 million in debt. The transaction
is subject to certain conditions, including required regulatory approvals.
During 2006, our Company’s acquisition and investment activity, including the acquisition of trademarks,
totaled approximately $901 million. In the third quarter of 2006, our Company acquired a controlling
shareholding interest in Kerry Beverages Limited (‘‘KBL’’). KBL was formed by the Company and the Kerry
Group in 1993 and has a majority ownership in 11 joint ventures that manufacture and distribute Company
products across nine provinces in China. KBL also has a minority interest in the joint venture bottler in Beijing.
Subsequent to the acquisition, the Company changed KBL’s name to Coca-Cola China Industries Limited
(‘‘CCCIL’’). As a result of the transaction, the Company owns 89.5 percent of the outstanding shares of CCCIL,
and we have agreed to purchase the remaining 10.5 percent by the end of 2008 at the same price per share as the
initial purchase price plus interest. We have all voting and economic rights over the remaining shares. This
transaction was accounted for as a business combination, and the results of CCCIL’s operations have been
included in the Company’s consolidated financial statements since August 29, 2006. CCCIL is included in the
Bottling Investments operating segment.
In the third quarter of 2006, our Company signed agreements with J. Bruce Llewellyn and Brucephil, Inc.
(‘‘Brucephil’’), the parent company of The Philadelphia Coca-Cola Bottling Company, for the potential
purchase of the remaining shares of Brucephil not currently owned by the Company. The agreements provide
for the Company’s purchase of the shares upon the election of Mr. Llewellyn or the election of the Company.
Based on the terms of these agreements, the Company concluded that it must consolidate Brucephil under
Interpretation No. 46(R). Brucephil’s financial statements were consolidated effective September 29, 2006.
Brucephil is included in our Bottling Investments operating segment.
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