Coca Cola 2007 Annual Report Download - page 123

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20: ACQUISITIONS AND INVESTMENTS (Continued)
price of the put option. Upon closing of the acquisition, we made preliminary estimates of the fair values of the assets
and liabilities for consolidation. Due to the number of entities involved, our Company is still in the process of
determining valuations for many of the assets and liabilities acquired; therefore, the preliminary estimates are subject to
adjustment as additional information is obtained. This additional information includes, but is not limited to, valuations
and physical counts of property, plant and equipment; valuation models for identifiable intangible assets; adjustments
resulting from reviewing the closing balance sheets of the acquired entities; and income tax valuations. Accordingly,
subsequent revisions to these preliminary estimates should be expected. As these issues are identified and resolved,
adjustments will be made to the preliminary values assigned to the assets and liabilities acquired, including goodwill,
which may be material. The preliminary amount of purchase price allocated to franchise rights was approximately
$343 million, property, plant and equipment was approximately $251 million, deferred tax liabilities was
approximately $99 million, and goodwill was approximately $111 million. Approximately $33 million of the goodwill
is deductible for tax purposes. The franchise rights have been assigned an indefinite life. This transaction was
accounted for as a business combination, with the results of the 18 German bottling and distribution operations
included in the Bottling Investments operating segment since September 1, 2007. Management has begun to formulate
a plan to improve the efficiency of the German bottling and distribution operations. As of December 31, 2007, this plan
had not yet been finalized.
In the third quarter of 2007, the Company acquired a 34 percent interest in Tokyo CCBC. The Company’s
investment in Tokyo CCBC is accounted for under the equity method. Equity income—net includes our proportionate
share of the results of Tokyo CCBC’s operations beginning July 2007 and is included in the Bottling Investments
operating segment. In the third quarter of 2007, the Company also acquired an additional interest in NORSA. After this
acquisition, the Company owned approximately 60 percent 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 effort to expand our still beverage offerings, our Company acquired Energy Brands Inc.,
also known as glacéau, the maker of enhanced water brands such as vitaminwater, fruitwater and smartwater, and
vitaminenergy, for approximately $4.1 billion. On the acquisition date, we made a cash payment of approximately
$2.9 billion for a 71.4 percent interest in glacéau and entered into a put and call option agreement with certain entities
associated with the Tata Group (“Tata”) to acquire the remaining 28.6 percent ownership interest in glacéau. As a result
of the terms of these agreements with Tata, the amount to be paid under the put and call option agreement of
$1.2 billion was recorded at the acquisition date as an additional investment in glacéau, with the offset being recorded
as a current liability within loans and notes payable on the consolidated balance sheet. On October 22, 2007, the
Company exercised its right to call the remaining interest in glacéau and paid Tata $1.2 billion such that the Company
owned 100 percent of glacéau as of December 31, 2007. Under the purchase method of accounting, the total purchase
price of glacéau is allocated to the tangible assets, liabilities and identifiable intangible assets acquired based on their
estimated fair values. Any excess of purchase price over the aggregate fair value of acquired net assets is recorded as
goodwill. Based upon a preliminary purchase price allocation, using information currently available, the Company
allocated approximately $2.8 billion to trademarks, approximately $2.2 billion to goodwill, approximately $0.2 billion
to customer relationships and approximately $0.9 billion to deferred tax liabilities. The trademarks have been assigned
indefinite lives. The goodwill resulting from this acquisition is primarily related to our ability to optimize the route to
market and increase the availability of the product, which will result in additional product sales. The goodwill also
includes the recognition of deferred tax liabilities associated with the identifiable intangible assets recorded in purchase
accounting. The goodwill is not deductible for tax purposes. These purchase price allocations are preliminary estimates
and are subject to change as additional information is obtained. Some of these changes could be material. Some of the
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