Coca Cola 2006 Annual Report Download - page 83

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: BOTTLING INVESTMENTS (Continued)
A summary of our significant transactions with CCE is as follows (in millions):
Year Ended December 31, 2006 2005 2004
Concentrate, syrup and finished product sales to CCE $ 5,378 $ 5,125 $ 5,203
Syrup and finished product purchases from CCE 415 428 428
CCE purchases of sweeteners through our Company 274 275 309
Marketing payments made by us directly to CCE 514 482 609
Marketing payments made to third parties on behalf of CCE 113 136 104
Local media and marketing program reimbursements from CCE 279 245 246
Payments made to CCE for dispensing equipment repair services 74 70 63
Other payments — net 99 81 19
Syrup and finished product purchases from CCE represent purchases of fountain syrup in certain territories
that have been resold by our Company to major customers and purchases of bottle and can products. Marketing
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. The Other payments—net line in the table above represents
payments made to and received from CCE that are individually not significant.
In 2006, our Company’s equity income related to CCE decreased by approximately $587 million, related to
our proportionate share of certain items recorded by CCE. Our proportionate share of these items included
approximately $602 million resulting from the impact of an impairment charge recorded by CCE. CCE recorded
a $2.9 billion pretax ($1.8 billion after tax) impairment of its North American franchise rights. The decline in the
estimated fair value of CCE’s North American franchise rights was the result of several factors, including but not
limited to (1) CCE’s revised outlook on 2007 raw material costs driven by significant increases in aluminum and
high fructose corn syrup (‘‘HFCS’’); (2) a challenging marketplace environment with increased pricing pressures
in several high-growth beverage categories; and (3) increased interest rates contributing to a higher discount rate
and corresponding capital charge. Our proportionate share of CCE’s charges also included approximately
$18 million due to restructuring charges recorded by CCE. These charges were partially offset by approximately
$33 million related to our proportionate share of changes in certain of CCE’s state and Canadian federal and
provincial tax rates. All of these charges and changes impacted our Bottling Investments operating segment.
In 2005, our equity income related to CCE was reduced by approximately $33 million 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
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