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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ÈANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2007
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File No. 1-2217
(Exact name of Registrant as specified in its charter)
DELAWARE 58-0628465
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
One Coca-Cola Plaza
Atlanta, Georgia 30313
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (404) 676-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK, $0.25 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ÈNo
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes No È
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past
90 days. Yes ÈNo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ÈAccelerated filer Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No È
The aggregate market value of the common equity held by non-affiliates of the Registrant (assuming for these purposes, but
without conceding, that all executive officers and Directors are “affiliates” of the Registrant) as of June 29, 2007, the last business
day of the Registrant’s most recently completed second fiscal quarter, was $114,819,922,506 (based on the closing sale price of the
Registrant’s Common Stock on that date as reported on the New York Stock Exchange).
The number of shares outstanding of the Registrant’s Common Stock as of February 22, 2008 was 2,324,012,042.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s Proxy Statement for the Annual Meeting of Shareowners to be held on April 16, 2008, are
incorporated by reference in Part III.

Table of contents

  • Page 1
    ....) One Coca-Cola Plaza Atlanta, Georgia 30313 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (404) 676-2121 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered COMMON STOCK...

  • Page 2
    ... Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services ...Business ...Risk Factors ...Unresolved...

  • Page 3
    ...sold in the United States since 1886, are now sold in more than 200 countries. Along with Coca-Cola, which is recognized as the world's most valuable brand, we market four of the world's top five nonalcoholic sparkling brands, including Diet Coke, Fanta and Sprite. In this report, the terms "Company...

  • Page 4
    ... 1A. Risk Factors," below. Products and Distribution Our Company manufactures and sells beverage concentrates, sometimes referred to as "beverage bases," and syrups, including fountain syrups, and finished beverages. As used in this report concentrates" means flavoring ingredients and, depending...

  • Page 5
    ...manufacture and sell juice and juice-drink products and certain water products to retailers and wholesalers in the United States and numerous other countries, both directly and through a network of business partners, including certain Coca-Cola bottlers. Our beverage products include Coca-Cola, Coca...

  • Page 6
    ... examples, in the United States, the Company launched Dasani Plus enhanced water beverages, Vanilla Coke Zero and the Minute Maid Enhanced Juice line; and in Canada, we launched the Fanta brand of sparkling beverages. In Latin America, the products launched included Coca-Cola Zero, Fanta Zero, Lift...

  • Page 7
    ... are authorized bottlers. The remaining approximately 11 percent of 2007 U.S. concentrate sales was attributable to sales by the Company of finished beverages, including juice and juice-drink products and certain water products. Coca-Cola Enterprises Inc., including its bottling subsidiaries and...

  • Page 8
    ... the bottler. In certain parts of the world outside the United States, we have not granted comprehensive beverage production rights to the bottlers. In such instances, we or our authorized suppliers sell Company Trademark Beverages to the bottlers for sale and distribution throughout the designated...

  • Page 9
    ... in 2007, excluding direct sales by the Company of juice and juice-drink products and other finished beverages ("U.S. bottle/can concentrate sales"). Certain other forms of U.S. Bottler's Agreements, entered into prior to 1987, provide for concentrates or syrups for certain Coca-Cola Trademark...

  • Page 10
    ... Coca-Cola Enterprises Inc. ("CCE"). Our ownership interest in CCE was approximately 35 percent at December 31, 2007. CCE is the world's largest bottler of the Company's beverage products. In 2007, sales of concentrates, syrups, mineral waters, juices, sweeteners and finished products by the Company...

  • Page 11
    ...to-drink tea category worldwide, except in the United States and Japan. Multon, a Russian juice business operated as a joint venture with Coca-Cola Hellenic, markets and sells juice products in Russia, Ukraine and Belarus. Jugos del Valle, a beverage business we acquired jointly with Coca-Cola FEMSA...

  • Page 12
    ... market price. Our Company generally has not experienced any difficulties in obtaining its requirements for nutritive sweeteners. In the United States, we purchase high fructose corn syrup to meet our and our bottlers' requirements with the assistance of Coca-Cola Bottlers' Sales & Services Company...

  • Page 13
    ..., sale, safety, advertising, labeling and ingredients of such products. Outside the United States, the production, distribution and sale of our many products and related operations are also subject to numerous similar and other statutes and regulations. A California law requires that a specific...

  • Page 14
    ... impact the Coca-Cola system's production costs and capacity. Water is the main ingredient in substantially all of our products. It is also a limited resource in many parts of the world, facing unprecedented challenges from overexploitation, increasing pollution and poor management. As demand...

  • Page 15
    ... turn depends on economic and political conditions in those markets and on our ability to acquire or form strategic business alliances with local bottlers and to make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology. Moreover, the...

  • Page 16
    ...In addition, we and our bottlers use a significant amount of electricity, natural gas and other energy sources to operate our concentrate and bottling plants. An increase in the price of fuel and other energy sources would increase our and the Coca-Cola system's operating costs and, therefore, could...

  • Page 17
    ...use various raw materials in our business, including high fructose corn syrup, sucrose, aspartame, saccharin, acesulfame potassium, sucralose and orange juice concentrate, as well as packaging materials such as polyethylene terephthalate (PET or plastic) for bottles and aluminum for cans. The prices...

  • Page 18
    ...-priced products offered by other companies. Softer consumer demand for our beverages in the United States or in other major markets could reduce the Coca-Cola system's profitability and could negatively affect our financial performance. Unfavorable economic and political conditions in international...

  • Page 19
    ... time to recall products entirely or from specific markets. Product recalls could affect our profitability and could negatively affect brand image. Also, adverse publicity surrounding obesity concerns, water usage, labor relations and the like could negatively affect our Company's overall reputation...

  • Page 20
    ... successfully manage our Company-owned bottling operations, our results could suffer. While we primarily manufacture, market and sell concentrates and syrups to our bottling partners, from time to time we do acquire or take control of bottling operations and have increasingly done so in recent years...

  • Page 21
    ...our products. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2. PROPERTIES Our worldwide headquarters is located on a 35-acre office complex in Atlanta, Georgia. The complex includes the approximately 621,000 square foot headquarters building, the approximately 870,000 square foot Coca-Cola...

  • Page 22
    ...of the Company and its subsidiaries taken as a whole. Carpenters On October 27, 2000, a class action lawsuit (Carpenters Health & Welfare Fund of Philadelphia & Vicinity v. The Coca-Cola Company, et al.) was filed in the United States District Court for the Northern District of Georgia alleging that...

  • Page 23
    ..., the Company purchased over $400 million of insurance coverage, of which approximately $350 million is still available to cover Aqua-Chem's costs for certain product liability and other claims. The Company sold Aqua-Chem to Lyonnaise American Holding, Inc. in 1981 under the terms of a stock sale...

  • Page 24
    ... of Georgia against the Company and certain current and former executive officers. These cases were subsequently consolidated, and an amended and consolidated complaint was filed in September 2005. The purported class consists of persons, except the defendants, who purchased Company stock between...

  • Page 25
    ... of CCE, filed a derivative suit (International Brotherhood of Teamsters v. The Coca-Cola Company, et al.) in the Delaware Court of Chancery for New Castle County naming the Company and current and former CCE board members, including certain current and former Company officers who serve or served on...

  • Page 26
    ... of the Board of Directors and Chief Executive Officer of the Company. Mr. Isdell joined the Coca-Cola system in 1966 with the local bottling company in Zambia. In 1972, he became General Manager of Coca-Cola Bottling of Johannesburg, the largest Coca-Cola bottler in South Africa at the time. 24

  • Page 27
    ... of Coca-Cola International. Between 1995 and 1998, he served as Managing Director of Coca-Cola Amatil Limited - Europe, and from 1999 until 2005, he served as President and Chief Executive Officer of Efes Beverage Group and as a board member of Coca-Cola Icecek. Mr. Kent rejoined the Company in...

  • Page 28
    ...the Latin America Group. Mr. Reyes began his career with The Coca-Cola Company in 1980 at Coca-Cola de México as Manager of Strategic Planning. In 1987, he was appointed Manager of the Sprite and Diet Coke brands at Corporate Headquarters. In 1990, he was appointed Marketing Director for the Brazil...

  • Page 29
    ... operations in New York, Paris, Hong Kong and Guam. Mr. Tripodi joined the Company as Chief Marketing and Commercial Officer effective September 2007 and was elected Senior Vice President of the Company in October 2007. All executive officers serve at the pleasure of the Board of Directors. There is...

  • Page 30
    ...for the quarterly periods indicated, the high and low sales prices per share for the Company's common stock, as reported on the New York Stock Exchange composite tape, and dividend per share information: Common Stock Market Prices High Low Dividends Declared 2007 Fourth quarter Third quarter Second...

  • Page 31
    ..., 2006, we publicly announced that our Board of Directors had authorized a plan (the "2006 Plan") for the Company to purchase up to 300 million shares of our Company's common stock. This column discloses the number of shares purchased pursuant to the 2006 Plan during the indicated time periods. 29

  • Page 32
    ... (Class B Stock), Bunge Limited, Campbell Soup Company, Loews Corporation (Carolina Group tracking stock), Chiquita Brands International, Inc., Coca-Cola Enterprises Inc., ConAgra Foods, Inc., Constellation Brands, Inc., Corn Products International, Inc., Dean Foods Company, Del Monte Foods Company...

  • Page 33
    ... financial statements and notes thereto contained in "Item 8. Financial Statements and Supplementary Data" of this report. Year Ended December 31, (In millions except per share data) 20071 20062 20053 20043,4 2003 SUMMARY OF OPERATIONS Net operating revenues Cost of goods sold Gross profit Selling...

  • Page 34
    ... sports drinks. Through the world's largest beverage distribution system, consumers in more than 200 countries enjoy the Company's beverages at a rate of approximately 1.5 billion servings each day. Our Company generates revenues, income and cash flows by selling beverage concentrates and syrups as...

  • Page 35
    ... long-term growth in unit case volume, per capita consumption and our share of worldwide nonalcoholic beverage sales. We heighten consumer awareness of and product appeal for our brands using integrated marketing programs. Through our relationships with our bottling partners and those who sell...

  • Page 36
    ... Leadership The Coca-Cola system has millions of customers around the world who sell or serve our products directly to consumers. We focus on enhancing value for our customers and providing solutions to grow their beverage businesses. Our approach includes understanding each customer's business and...

  • Page 37
    ...is well positioned to appropriately address these challenges and risks. See also "Item 1A. Risk Factors" in Part I of this report for additional information about risks and uncertainties facing our Company. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared...

  • Page 38
    ... participants would use. Factors that management must estimate when performing recoverability and impairment tests include, among others, the economic life of the asset, sales volume, prices, inflation, cost of capital, marketing spending, foreign currency exchange rates, tax rates and capital...

  • Page 39
    ...: December 31, 2007 (In millions except percentages) Carrying Value Percentage of Total Assets Tested for impairment when conditions indicate carrying value may be impaired: Equity method investments Cost method investments, principally bottling companies Other assets Property, plant and equipment...

  • Page 40
    ... prices of publicly traded shares, and our Company's carrying values for significant investments in publicly traded bottlers accounted for as equity method investees (in millions): December 31, 2007 Fair Value Carrying Value Difference Coca-Cola Enterprises Inc. Coca-Cola Hellenic Bottling Company...

  • Page 41
    ... of sales proceeds and appraisals. Where applicable, we use an appropriate discount rate that is commensurate with the risk inherent in the projected cash flows. In 2006, our Company recorded impairment charges of approximately $41 million primarily related to trademarks for beverages sold in...

  • Page 42
    ... title usually transfers upon shipment to or receipt at our customers' locations, as determined by the specific sales terms of each transaction. Our sales terms do not allow for a right of return except for matters related to any manufacturing defects on our part. In addition, our customers can earn...

  • Page 43
    ... the financial reporting and tax bases of assets and liabilities. The tax rates used to determine deferred tax assets or liabilities are the enacted tax rates in effect for the year in which the differences are expected to reverse. Based on the evaluation of all available information, the Company...

  • Page 44
    ... supply point changes, timing of price increases, new product introductions and changes in product mix can impact unit case volume and concentrate sales and can create differences between unit case volume and concentrate sales growth rates. Information about our volume growth by operating segment is...

  • Page 45
    ... unit case volume growth for Coca-Cola, Coca-Cola Zero and Diet Coke or Coca-Cola light.), The Coke Side of Life Campaign, Christmas programs and activation of the Rugby World Cup. In addition, the full-year impact of the 2006 acquisition of Apollinaris GmbH, a German premium source water brand...

  • Page 46
    ...growth in Japan. The increase in unit case volume in China was led by double-digit growth in sparkling beverages, Minute Maid and Nestea. The increase in unit case volume in Japan was primarily due to growth in Trademarks Coca-Cola, Sprite, Sokenbicha and water brands. Georgia Coffee volume declined...

  • Page 47
    ... impact of a full-year of unit case volume compared to a partial year in 2005 due to the joint acquisition of Multon with Coca-Cola Hellenic in the second quarter of 2005. The Company only reports unit case volume related to Multon, as the Company does not sell concentrates or syrups to Multon. 45

  • Page 48
    ... of Income Percent Change Year Ended December 31, (In millions except per share data and percentages) 2007 2006 2005 2007 vs. 2006 2006 vs. 2005 NET OPERATING REVENUES Cost of goods sold GROSS PROFIT GROSS PROFIT MARGIN Selling, general and administrative expenses Other operating charges OPERATING...

  • Page 49
    ... Financial Statements. Price and product/geographic mix increased net operating revenues by 2 percent in 2007 versus 2006, primarily due to favorable pricing and product/package mix across the majority of the operating segments. The favorable impact of currency fluctuations in 2007 compared...

  • Page 50
    ...primarily in Japan. Gross profit margin in 2005 was favorably impacted by the receipt of approximately $109 million in proceeds related to a class action lawsuit settlement concerning price-fixing in the sale of high fructose corn syrup ("HFCS") purchased by the Company during the years 1991 to 1995...

  • Page 51
    ... of certain bottling operations (refer to Note 20 of Notes to Consolidated Financial Statements), increased sales and service costs for certain brand acquisitions and a 4 percent increase due to foreign currency fluctuations. Selling and advertising expenses increased 20 percent in 2007 compared to...

  • Page 52
    .... These restructuring costs and asset write-downs included the reorganization of the North American business around three main business units: Sparkling Beverages, Still Beverages and Emerging Brands. They also included the plan to close a beverage concentrate manufacturing and distribution plant in...

  • Page 53
    ... which impacted Africa and Bottling Investments. Refer to the heading "Foreign Exchange." In 2007, price increases across the majority of operating segments favorably impacted both operating income and operating margins. In 2007, increased spending on marketing and innovation activities impacted the...

  • Page 54
    ... long-term debt. This monitoring includes a review of business and other financial risks. From time to time, we enter into interest rate swap agreements and other related instruments to manage our mix of fixed-rate and variable-rate debt. In 2007, interest income increased by $43 million compared...

  • Page 55
    ... "Critical Accounting Policies and Estimates-Goodwill, Trademarks and Other Intangible Assets." Equity income-net also increased due to our proportionate share of increased net income from certain of our equity method investees as a result of the overall improving health of the Coca-Cola bottling...

  • Page 56
    ...in Coca-Cola Icecek shares in an initial public offering. Refer to Note 19 of Notes to Consolidated Financial Statements. This line item in 2006 also included $15 million in foreign currency exchange losses, the accretion of $58 million for the discounted value of our liability to purchase Coca-Cola...

  • Page 57
    ...the gains on the sale of a portion of our equity interest in Coca-Cola Amatil and Vonpar, at a combined effective tax rate of 58 percent, or approximately $83 million; a tax benefit related to restructuring charges and asset write-downs recorded by the Company, at an effective tax rate of 18 percent...

  • Page 58
    ... from Investing Activities Our cash flows used in investing activities are summarized as follows (in millions): Year Ended December 31, 2007 2006 2005 Cash flows (used in) provided by investing activities: Acquisitions and investments, principally beverage and bottling companies Purchases of other...

  • Page 59
    ... of cash used for acquisitions and investments was primarily related to the acquisition of various trademarks and brands, none of which was individually significant. In April 2005, our Company and Coca-Cola Hellenic jointly acquired Multon for a total purchase price of approximately $501 million...

  • Page 60
    ... our capital structure and financial policies as well as the aggregated balance sheet and other financial information for the Company and certain bottlers, including CCE and Coca-Cola Hellenic. While the Company has no legal obligation for the debt of these bottlers, the rating agencies believe the...

  • Page 61
    ...179 million of their proceeds from the sale of glacéau in common stock of the Company at then current market prices. These shares of Company common stock were placed in escrow pursuant to the glacéau acquisition agreement. Share Repurchases In October 1996, our Board of Directors authorized a plan...

  • Page 62
    ... information regarding short-term loans and notes payable. Upon payment of outstanding commercial paper, we typically issue new commercial paper. Lines of credit and other short-term borrowings are expected to fluctuate depending upon current liquidity needs, especially at international subsidiaries...

  • Page 63
    ...term debt, including the use of cash flows from operating activities, issuance of commercial paper or issuance of other long-term debt. We calculated estimated interest payments for long-term debt as follows: for fixed-rate debt, we calculated interest based on the applicable rates and payment dates...

  • Page 64
    ...tax bases of assets and liabilities and their respective book bases, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to...

  • Page 65
    ... bottling and distribution operations, CCBPI, Fuze and Leao Junior (refer to Note 20 of Notes to Consolidated Financial Statements); an increase in loans and notes payable of $2,684 million, primarily due to net borrowings of commercial paper and short-term debt during 2007 to fund current-year...

  • Page 66
    ... mix of fixed-rate and variable-rate debt, as well as our mix of short-term debt versus long-term debt. From time to time, we enter into interest rate swap agreements to manage our mix of fixed-rate and variable-rate debt. Value-at-Risk We monitor our exposure to financial market risks using several...

  • Page 67
    ... Balance Sheets ...Consolidated Statements of Cash Flows ...Consolidated Statements of Shareowners' Equity ...Notes to Consolidated Financial Statements ...Report of Management on Internal Control Over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Report...

  • Page 68
    THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, (In millions except per share data) 2007 2006 2005 NET OPERATING REVENUES Cost of goods sold GROSS PROFIT Selling, general and administrative expenses Other operating charges OPERATING INCOME Interest ...

  • Page 69
    THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, (In millions except par value) 2007 2006 ASSETS CURRENT ASSETS Cash and cash equivalents Marketable securities Trade accounts receivable, less allowances of $56 and $63, respectively Inventories Prepaid expenses and ...

  • Page 70
    THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (In millions) 2007 2006 2005 OPERATING ACTIVITIES Net income Depreciation and amortization Stock-based compensation expense Deferred income taxes Equity income or loss, net of dividends Foreign ...

  • Page 71
    THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY Year Ended December 31, (In millions except per share data) 2007 2006 2005 NUMBER OF COMMON SHARES OUTSTANDING Balance at beginning of year Stock issued to employees exercising stock options Purchases of stock for...

  • Page 72
    ...the consolidated financial statements. We primarily sell concentrates and syrups, as well as finished beverages, to bottling and canning operations, distributors, fountain wholesalers and fountain retailers. Our Company owns or licenses more than 450 brands, including Coca-Cola, Diet Coke, Fanta and...

  • Page 73
    ... an increase in tax rates; an inability to achieve our overall long-term goals; an inability to protect our information systems; future impairment charges; an inability to successfully manage our Company-owned bottling operations; and global or regional catastrophic events. Our Company monitors...

  • Page 74
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) limited to, cash discounts, funds for promotional and marketing activities, volume-based incentive programs and support for infrastructure ...

  • Page 75
    ...-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) basis of existing assets and liabilities. The tax rate used to determine the deferred tax assets and liabilities is the enacted tax rate for the year...

  • Page 76
    ... our bottling system and increasing unit case volume. When facts and circumstances indicate that the carrying value of the assets may not be recoverable, management evaluates the recoverability of these assets by preparing estimates of sales volume, the resulting gross profit and cash flows...

  • Page 77
    ... in estimating future cash flows. In addition, where applicable, an appropriate discount rate is used, based on the Company's cost of capital rate or location-specific economic factors. When the fair value is less than the carrying value of the intangible assets or the reporting unit, we record an...

  • Page 78
    ...COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) fair value in our consolidated balance sheets, with fair values of foreign currency derivatives estimated based on quoted market prices or pricing...

  • Page 79
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) No. 160 also establishes disclosure requirements that clearly identify and distinguish between the controlling and noncontrolling interests ...

  • Page 80
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting...

  • Page 81
    ...proportionate share of the net assets of CCE exceeded our investment by approximately $337 million. This difference is not amortized. A summary of financial information for CCE is as follows (in millions): Year Ended December 31, 2007 2006 2005 Net operating revenues Cost of goods sold Gross profit...

  • Page 82
    ... 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...

  • Page 83
    .... These minimum average unit case volume levels ensure adequate gross profit from sales of concentrate to fully recover the capitalized costs plus a return on the Company's investment. Should CCE fail to purchase the specified numbers of cold-drink equipment for any calendar year through 2010...

  • Page 84
    .... A summary of financial information for our equity method investees in the aggregate, other than CCE, is as follows (in millions): Year Ended December 31, 2007 2006 2005 Net operating revenues Cost of goods sold Gross profit Operating income Net income (loss) Net income (loss) available to common...

  • Page 85
    ... of the sale of its bottling operations in South Korea. Refer to Note 19. Equity income in 2007 was reduced by approximately $99 million in the Bottling Investments operating segment related to our proportionate share of asset write-downs recorded by Coca-Cola Bottlers Philippines, Inc. ("CCBPI...

  • Page 86
    ... Note 10 and Note 16. If valued at the December 31, 2007, quoted closing prices of shares actively traded on stock markets, the value of our equity method investments in publicly traded bottlers other than CCE would have exceeded our carrying value by approximately $5.8 billion. Net Receivables and...

  • Page 87
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5: PROPERTY, PLANT AND EQUIPMENT The following table summarizes our property, plant and equipment (in millions): December 31, 2007 2006 Land Buildings and improvements Machinery and equipment Containers ...

  • Page 88
    ... limited availability of these trademark beverages in the marketplace. We determined the amount of this impairment charge by comparing the fair value of the intangible assets to the carrying value. Fair values were derived using discounted cash flow analyses with a number of scenarios that were...

  • Page 89
    ... terms and conditions. Some of the financial arrangements require compensating balances, none of which is presently significant to our Company. As of December 31, 2006, loans and notes payable included a liability to acquire the remaining approximate 59 percent of the outstanding stock of Coca-Cola...

  • Page 90
    ...STATEMENTS NOTE 9: LONG-TERM DEBT On November 1, 2007, the Company issued approximately $1,750 million of notes due on November 15, 2017. The proceeds from this $1,750 million debt issuance were used to repay short-term debt, including commercial paper issued to finance our current year acquisitions...

  • Page 91
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10: COMPREHENSIVE INCOME AOCI, including our proportionate share of equity method investees' AOCI, consisted of the following (in millions): December 31, 2007 2006 Foreign currency translation adjustment ...

  • Page 92
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11: FINANCIAL INSTRUMENTS Certain Debt and Marketable Equity Securities Investments in debt and marketable equity securities, other than investments accounted for by the equity method, are categorized as trading, ...

  • Page 93
    ... 31, 2007, 2006 and 2005, gross realized gains and losses on sales of trading and available-for-sale securities were not material. The cost of securities sold is based on the specific identification method. Fair Value of Other Financial Instruments The carrying amounts of cash and cash equivalents...

  • Page 94
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11: FINANCIAL INSTRUMENTS (Continued) We recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance sheets, with fair values estimated based on quoted market prices...

  • Page 95
    ...long-term debt. This monitoring includes a review of business and other financial risks. From time to time, in anticipation of future debt issuances, we may manage our risk to interest rate fluctuations through the use of derivative financial instruments. The Company had no outstanding interest rate...

  • Page 96
    ... based on quoted market prices or pricing models using current market rates. These amounts are primarily reflected in prepaid expenses and other assets and accounts payable and accrued expenses in our consolidated balance sheets. As of December 31, 2007, we had $23 million reflected in prepaid...

  • Page 97
    ... table summarizes activity in AOCI related to derivatives designated as cash flow hedges held by the Company during the applicable periods (in millions): Before-Tax Amount Income Tax After-Tax Amount 2007 Accumulated derivative net gains (losses) as of January 1, 2007 Net changes in fair value of...

  • Page 98
    ...-Brooks, Inc. ("Aqua-Chem"). A division of Aqua-Chem manufactured certain boilers that contained gaskets that Aqua-Chem purchased from outside suppliers. Several years after our Company sold this entity, Aqua-Chem received its first lawsuit relating to asbestos, a component of some of the gaskets...

  • Page 99
    ... 31, 2007, we had approximately $441 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under our plans. This cost is expected to be recognized over a weighted-average period of 1.8 years as stock-based compensation expense. This...

  • Page 100
    ... 120 million shares of our common stock was approved to be issued or transferred to certain officers and employees pursuant to stock options granted under the 1991 Option Plan. Options to purchase common stock under the 1991 Option Plan have been granted to Company employees at fair market value at...

  • Page 101
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: STOCK COMPENSATION PLANS (Continued) The following table sets forth information about the weighted-average fair value of options granted during the past three years and the weighted-average assumptions used ...

  • Page 102
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: STOCK COMPENSATION PLANS (Continued) A summary of stock option activity under all plans for the years ended December 31, 2007, 2006 and 2005 is as follows: Shares (In millions) Weighted-Average Exercise Price ...

  • Page 103
    ...granted to certain officers and key employees of our Company. At December 31, 2007, approximately 28 million shares remain available for grant under the Restricted Stock Award Plans, when all outstanding awards including promises to grant restricted stock and performance share unit ("PSU") awards at...

  • Page 104
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: STOCK COMPENSATION PLANS (Continued) Time-Based Restricted Stock Awards The following table summarizes information about time-based restricted stock awards: 2007 WeightedAverage Grant-Date Fair Value 2006 ...

  • Page 105
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: STOCK COMPENSATION PLANS (Continued) The following table summarizes information about performance-based restricted stock awards: 2007 WeightedAverage Grant-Date Fair Value 2006 WeightedAverage Grant-Date Fair ...

  • Page 106
    ... COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: STOCK COMPENSATION PLANS (Continued) the Maximum Award of 150 percent of target was achieved. Also, outstanding as of December 31, 2007 are 164,500 performance share units granted in 2007 with certain financial...

  • Page 107
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: STOCK COMPENSATION PLANS (Continued) The following table summarizes information about the conversions of performance share unit awards to restricted stock and promises to grant restricted stock: 2007 ...

  • Page 108
    ...our benefit plans (in millions): December 31, Pension Benefits 2007 2006 Other Benefits 2007 2006 Benefit obligation at beginning of year1 Service cost Interest cost Foreign currency exchange rate changes Amendments Actuarial (gain) loss Benefits paid2 Business combinations Settlements Curtailments...

  • Page 109
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued) The following table sets forth the change in the fair value of plan assets for our benefit plans (in millions): December 31, Pension Benefits 2007 ...

  • Page 110
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued) The following tables set forth the 2007 changes in AOCI for our benefit plans (in millions): Pension Benefits Other Benefits Net actuarial loss (gain...

  • Page 111
    ...-average assumptions used in computing net periodic benefit cost are as follows: Year Ended December 31, 2007 Pension Benefits 2006 2005 2007 Other Benefits 2006 2005 Discount rate Rate of increase in compensation levels Expected long-term rate of return on plan assets The assumed health care cost...

  • Page 112
    ... among asset classes. We evaluate the rate of return assumption on an annual basis. The expected long-term rate of return assumption used in computing 2007 net periodic pension cost for the U.S. plans was 8.5 percent. As of December 31, 2007, the 10-year annualized return on U.S. plan assets was...

  • Page 113
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued) Other Benefit Plans Plan assets associated with other benefits represent funding of the primary U.S. postretirement benefit plans. In late 2006, we ...

  • Page 114
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 17: INCOME TAXES Income before income taxes consisted of the following (in millions): Year Ended December 31, 2007 2006 2005 United States International $ 2,545 5,328 $ 7,873 $ 2,126 4,452 $ 6,578 $ 2,268 4,...

  • Page 115
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 17: INCOME TAXES (Continued) A reconciliation of the statutory U.S. federal tax rate and effective tax rates is as follows: Year Ended December 31, 2007 2006 2005 Statutory U.S. federal tax rate State and local ...

  • Page 116
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 17: INCOME TAXES (Continued) Our effective tax rate reflects the tax benefits from having significant operations outside the United States that are taxed at rates lower than the statutory U.S. rate of 35 percent. ...

  • Page 117
    THE COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 17: INCOME TAXES (Continued) Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $11.9 billion at December 31, 2007. Those earnings are considered to be indefinitely reinvested ...

  • Page 118
    ...December 31, 2007 2006 Deferred tax assets: Property, plant and equipment Trademarks and other intangible assets Equity method investments (including translation adjustment) Other liabilities Benefit plans Net operating/capital loss carryforwards Other Gross deferred tax assets Valuation allowances...

  • Page 119
    ... its operations globally. In North America, the Company reorganized its operations around three main business units: Sparkling Beverages, Still Beverages and Emerging Brands. In Ireland, the Company announced a plan to close its beverage concentrate manufacturing and distribution plant in Drogheda...

  • Page 120
    ...COCA-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18: RESTRUCTURING COSTS (Continued) The table below summarizes the balance of accrued streamlining expenses, which is included in the balance of accounts payable and accrued expenses in the consolidated balance sheets...

  • Page 121
    ...-COLA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 19: SIGNIFICANT OPERATING AND NONOPERATING ITEMS (Continued) Equity income in 2007 was reduced by approximately $99 million in the Bottling Investments operating segment related to our proportionate share of asset write...

  • Page 122
    ... of 2007, the Company and Coca-Cola FEMSA jointly acquired Jugos del Valle, the second largest producer of packaged juices, nectars and fruit-flavored beverages in Mexico and the largest producer of such beverages in Brazil. The purchase price was approximately $370 million plus the assumption...

  • Page 123
    ...of NORSA. The Company began consolidating this entity from the date we acquired the additional 11 percent interest. The combined purchase price for these third quarter acquisitions was approximately $203 million. NORSA is included in the Bottling Investments operating segment. On June 7, 2007, in an...

  • Page 124
    ...operating segment as of the acquisition date. In addition, certain executive officers and former shareholders of glacéau invested approximately $179 million of their proceeds from the sale of glacéau in common stock of the Company at then current market prices. These shares of Company common stock...

  • Page 125
    ... as a business combination, with the results of Scarlet included in the Company's consolidated financial statements since the date of acquisition. In May 2007, Scarlet issued common shares to a Black Economic Empowerment Entity ("BEEE") at a price per share equal to the current carrying value of our...

  • Page 126
    ... the production, marketing and distribution of DWNA's bottled spring and source water business in the United States. This transaction was accounted for as a business combination, and the consolidated results of CCDA's operations have been included in the Company's consolidated financial statements...

  • Page 127
    ...and Services The business of our Company is nonalcoholic beverages. Our operating segments derive a majority of their revenues from the manufacture and sale of beverage concentrates and syrups and, in some cases, the sale of finished beverages. Method of Determining Segment Income or Loss Management...

  • Page 128
    ... costs, net of benefits from tax rate changes, recorded by equity method investees and was increased by $227 million for Corporate primarily due to gains on the sale of real estate in Spain and in the United States, the sale of our ownership in Vonpar and the sale of Coca-Cola Amatil shares...

  • Page 129
    ...taxes benefited by approximately $23 million for Corporate due to noncash pretax gains on issuances of stock by Coca-Cola Amatil in connection with the acquisition of SPC Ardmona Pty. Ltd., an Australian fruit company. Refer to Note 4. Geographic Data (in millions) Year Ended December 31, 2007 2006...

  • Page 130
    ... has audited and reported on the consolidated financial statements of The Coca-Cola Company and subsidiaries and the Company's internal control over financial reporting. The reports of the independent auditors are contained in this annual report. E. Neville Isdell Chairman, Board of Directors, and...

  • Page 131
    ...158 related to defined benefit pension and other postretirement plans. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Coca-Cola Company's internal control over financial reporting as of December 31, 2007, based on criteria...

  • Page 132
    ... effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Coca-Cola Company and subsidiaries...

  • Page 133
    ... 18 and Note 19. An approximate $89 million charge to equity income-net primarily related to our proportionate share of an impairment recorded on investments by Coca-Cola Amatil in bottling operations in South Korea, along with our proportionate share of an asset write-down recorded by CCBPI and our...

  • Page 134
    ... related to the sale of a portion of our ownership interest in Coca-Cola Amatil. Refer to Note 3 and Note 19. An approximate $21 million increase to equity income-net primarily related to our proportionate share of tax benefits recorded at CCE, partially offset by asset write-downs and restructuring...

  • Page 135
    ...-net for our proportionate share of items impacting investees. Refer to Note 3 and Note 19. An income tax benefit of approximately $41 million related to the reversal of a tax valuation allowance due to the sale of a portion of our equity method investment in Coca-Cola FEMSA, partially offset by...

  • Page 136
    ...Report of Management on Internal Control Over Financial Reporting, included in Part II, "Item 8. Financial Statements and Supplementary Data" of this report. During 2007, the Company acquired the 65 percent interest in Coca-Cola Bottlers Philippines, Inc. which it did not already own and 18 bottling...

  • Page 137
    ... Board of Directors and Corporate Governance-The Board and Board Committees" in the Company's 2008 Proxy Statement is incorporated herein by reference. See Item X in Part I of this report for information regarding executive officers of the Company. The Company has adopted a code of business conduct...

  • Page 138
    ... Statements of Shareowners' Equity-Years ended December 31, 2007, 2006 and 2005. Notes to Consolidated Financial Statements. Report of Independent Registered Public Accounting Firm. Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting. 2. Financial...

  • Page 139
    ... and Plan of Merger by and among The Coca-Cola Company, Mustang Acquisition Company, LLP, Energy Brands Inc. d/b/a Glaceau, and the Stockholder Representatives identified therein, dated as of May 24, 2007-incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form...

  • Page 140
    ... Current Report filed on February 17, 2006.* Form of Restricted Stock Agreement (Performance Share Unit Agreement) in connection with the 1989 Restricted Stock Award Plan of the Company-incorporated herein by reference to Exhibit 99.3 of the Company's Form 8-K Current Report filed February 14, 2007...

  • Page 141
    ... Stock Agreement (Performance Share Unit Agreement) for France in connection with the 1989 Restricted Stock Award Plan of the Company, as adopted December 12, 2007-incorporated herein by reference to Exhibit 10.6 of the Company's Form 8-K Current Report filed February 21, 2008.* Compensation...

  • Page 142
    ... Company's Form 8-K Current Report filed April 5, 2006.* Compensation Plan for Non-Employee Directors of The Coca-Cola Company, as amended and restated on December 13, 2007-incorporated herein by reference to Exhibit 99.1 of the Company's Form 8-K Current Report filed on December 19, 2007. Long-Term...

  • Page 143
    ... Report for the year ended December 31, 2002.* Share Purchase Plan-Denmark, effective as of 1991-incorporated herein by reference to Exhibit 10.33 of the Company's Form 10-K Annual Report for the year ended December 31, 2002.* The Coca-Cola Company Benefits Plan for Members of the Board of Directors...

  • Page 144
    ...8-K Current Report filed on September 12, 2006.* Refreshment Services S.A.S. Defined Benefit Plan, dated September 25, 2006-incorporated herein by reference to Exhibit 10.3 of the Company's Form 10-Q Quarterly Report for the quarter ended September 29, 2006.* Share Purchase Agreement among Coca-Cola...

  • Page 145
    ... 31, 2007. Consent of Independent Registered Public Accounting Firm. Powers of Attorney of Officers and Directors signing this report. Rule 13a-14(a)/15d-14(a) Certification, executed by E. Neville Isdell, Chairman, Board of Directors, and Chief Executive Officer of The Coca-Cola Company. Rule...

  • Page 146
    ... 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE COCA-COLA COMPANY (Registrant) By: /s/ E. NEVILLE ISDELL E. NEVILLE ISDELL Chairman, Board of Directors, and Chief Executive Officer Date: February 28, 2008 Pursuant to the...

  • Page 147
    ... February 28, 2008 * SAM NUNN Director February 28, 2008 * PETER V. UEBERROTH Director February 28, 2008 * JAMES B. WILLIAMS Director February 28, 2008 *By: /s/ CAROL CROFOOT HAYES CAROL CROFOOT HAYES Attorney-in-fact February 28, 2008 JACOB WALLENBERG Director February 28, 2008 JAMES D. ROBINSON...

  • Page 148
    ... I, E. Neville Isdell, Chairman, Board of Directors, and Chief Executive Officer of The Coca-Cola Company, certify that: 1. 2. I have reviewed this annual report on Form 10-K of The Coca-Cola Company; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit...

  • Page 149
    ... CERTIFICATIONS I, Gary P. Fayard, Executive Vice President and Chief Financial Officer of The Coca-Cola Company, certify that: 1. 2. I have reviewed this annual report on Form 10-K of The Coca-Cola Company; Based on my knowledge, this report does not contain any untrue statement of a material fact...

  • Page 150
    ...OF 2002 In connection with the annual report of The Coca-Cola Company (the "Company") on Form 10-K for the period ended December 31, 2007 (the "Report"), I, E. Neville Isdell, Chairman, Board of Directors, and Chief Executive Officer of the Company and I, Gary P. Fayard, Executive Vice President and...

  • Page 151

  • Page 152
    Cert no. SCS-COC-00648